Opening balance equity definition
/What is Opening Balance Equity?
Opening balance equity is the offsetting entry used when entering account balances into the Quickbooks accounting software. This account appears in your organization’s chart of accounts as an equity account, and is created automatically by the software.
Once the account entry process is completed for all accounts, compare the total opening balance equity to the sum of all beginning equity accounts listed in the prior account balances. If the balances match, then the initial entry of accounts was accurate. If not, then review the initial account balances entry to see if there was a data entry error. If there was an error, then you will need to adjust your entry to record the initial account balances.
Once all initial account balances have been entered, the balance in the opening balance equity account is moved to the normal equity accounts, such as common stock and retained earnings. From this point forward, it should no longer be possible to access the opening balance equity account, which means that access to the account should be locked down.
Related AccountingTools Courses
FAQs
Is Opening Balance Equity a Real Equity Account?
Opening balance equity is not a true equity account. It is a temporary account used by accounting software to balance initial entries when setting up a company’s books. Once setup is complete, the balance should be reviewed and reclassified to appropriate accounts like retained earnings or owner’s equity.