Opening Balance Equity

Opening Balance Equity is a Quickbooks creation that roughly translates to either "I don't understand double-entry bookkeeping" or "I don't know how to reconcile my bank account." It's the default "plug" account when setting up beginning balances, and should zero out if you managed to enter all of the beginning balances (including retained earnings and similar easily-forgotten ones). It's also the plug account for forcing the bank reconciliation to balance.

You need to look at the underlying transaction that created the balance to figure out what the appropriate adjustment is.

Allyphoe was right about the OBE account. It does catch (and allow) a lot of slop.

It is usefule in one respect, though. I generally don't like to use compound journal entries because they are hard for the next person to trace and understand. By using the OBE account, an opening balance sheet can be populated by using a series of simple journal entries. An alternative would be to create some sort of 'clearing' account in the income/expense part of the chart.

Scott Bonacker CPA

Springfield, Missouri

What a nice reply, Scott! My partner is the QB Pro Adviser around here (I just do taxes), but I've heard her complain forever about the Opening Balance Equity account. Every client who walks in usually has a load of entries in it, and she's got to sort it all out. Yours is the first mention I've ever seen of how that account can actually be useful. I'm printing this thread to give to my partner when she returns from vacation. Thank you!

I have a related question. I am starting with QBPro using Aug 1 start date. I would like to enter my YTD Jan-Jul income/expenses summary balance. QB says to use the OBE account but that it should zero out. Is the only way to do this to credit/debit the appropriate bank accounts? By the answers here, it seems so; but when I got this stack of transactions which had not been put into any program yet, there were several banks used. Is there any quick way to do this or is the only option to go back and sort through which bank accounts were hit by the different transactions? For those of us not as well versed in Accounting principles, I think the OBE instructions for entering income and expense summaries is a bit misleading. Also, after following the instructions, and doing a report, all of my income accounts appear as negatives, as well as my expense accounts. I guess it is because these have not really been swept into the inc/exp accounts yet?