How To Record An Opening Balance In QuickBooks

How To Record An Opening Balance In QuickBooks

The amount of money in a company’s account at the beginning of a new financial period is known as opening balance. It is the first entry in the accounts, either when a company is first starting up its accounts or after a year-end. Here are steps to editing opening balance. You also can save your time and effort by dialing our QuickBooks support number in order to get help from certified ProAdvisors.

Note:

  • Always consult your accounting professional before making any entries. To get more information about the opening balance while setting up an account or vendor in QuickBooks, press on f1 key or click the link “should I enter an opening balance? “
  • You should not enter an opening balance if you do not have a balance before your QuickBooks start date.
  • You can use one or more GJE that you create from the balance sheet for the previous fiscal year When you created a new company file with a start date after than the actual company. When using journal entries to record opening balances, Remember the following tips:
    • You can keep the journal entries in balance by considering using the opening balance equity as the offset account.
    • If you want to enter balances from the start of the year. It is enough to enter last year’s retained earnings rather than passing entries for the individual accounts ( income, expense, and cost of goods sold (COGS)).
    • Per journal entry, you can enter only single account receivable or account payable transaction. So you need to make multiple journal entries to load the balance for these accounts.
    • Always enter a vendor or customer name in the name column of account payable journal entries, accounts receivable and sales tax payable journal entries.
    • You can use the inventory adjustment screen to set the value and the quantity of inventory. You don’t have to enter the Inventory Asset balance through a journal entry.
Important:

1. The date you entered is to indicate you that when you begin tracking your financial transactions in QuickBooks when you set up your company file.
2. The first time you record an opening balance in a balance sheet which created by QuickBooks. QuickBooks records the amounts in Opening Balance Equity, as you start entering the opening balance on a sheet. That means you already have the correct balance sheet for your company before, you entered all your company’s assets and liabilities.
3. Profits from earlier accounting periods that have not been distributed to the company’s owners. At the end of your fiscal year, QuickBooks computes your profit (or loss) into an equity account named Retained Earnings.

steps to create opening balance in QuickBooks

Enter opening balance in QuickBooks

Bank or credit card accounts

  • From the Company menu, click on Chart of Accounts.
  • In the Chart of Accounts window, right snap anyplace and click New.
  • Choose Bank or Credit Card for the Account Type.
  • In the Add New Account screen:
    • Round out every required field.
    • Tap the Enter Opening Balance catch
    • Even after the account is set up if there is no transaction record, Enter Opening Balance button will be available. Once transactions are entered, instead of entering opening balance option you will see Change Opening Balance.
    • Before your QuickBooks Start Date, You have to enter the Ending Balance and Ending Date from the last bank statement you received.
  • Click Ok.
  • Click Save & Close.

If you got outstanding transactions on credit card or in the bank, you have to account them in order for your accurate reconciliation in the future.

After entering your opening balances, follow the given steps:
  • From your last bank statement Take the ending balance:
    • An amount can be Increase by any outstanding checks.
    • The amount can be decreased by any outstanding deposits.
  • Enter a journal entry crediting opening balance equity and debiting the bank or credit card account
    • Select Make General Journal Entries, From the Company menu
    • Enter a number for the journal entry and Set the date
    • Choose the bank or credit card account From the Account column and in the Debit column, enter the amount calculated in step 2.
    • On the next line, click on the Account option and from the drop-down menu, choose the option Opening Balance Equity. Enter the amount calculated in step 2, from the Credit column.
  • Enter the outstanding transactions by creating checks or deposits using the Opening Balance Equity as the expense/income account. Without impacting the prior period balance sheet These transactions would be available for reconciliation.
  • Using the process mini reconciliation to Reconcile this opening balance journal entry for each account. Refer to 6950 for detailed steps.

Other balance sheet accounts

You need to be attentive while entering an opening balance for a Fixed Asset, Equity, Long-term Liability, Other Asset, Other Current Asset, and Other Current Liability accounts because otherwise there is a possibility of creating a double accounting entry. Also, Accounts Receivable and Accounts Payable opening balances are treated differently in QuickBooks. See the Customers and Vendors section in this article for information on how to set it up.

Using the Chart of Accounts

  • Select the Chart of Accounts From the Company menu.
  • Right-click anywhere and select New, In the Chart of Accounts window,
  • Now pick the appropriate Account Type.
  • In the Add New Account screen:
    • Fill all the required fields.
    • Select the Enter Opening Balance button.
    • Enter the amount of the opening balance and the date. Put the date before your QuickBooks start date.
    • Click Ok.
  • Click Save & Close

Using a journal entry

  • Select Make General Journal Entry, From the Company menu,
  • First Set the date and enter a number for the journal entry.
  • Choose or create the account to be entered, From the Account column that You may wish to enter the accounts in the order in which they appear on the balance sheet or trial balance.
  • Enter a positive amount in the account balance of the appropriate column depending on the type of account. Example:
    • For Asset accounts, positive balances appear in the Debit column.
    • For Equity and Liability, positive balances appear in the Credit column.
  • Repeat steps 3 and 4 for each account.
  • When all balances have been entered, the Debit and Credit columns must be equal. You can Use the Opening Balance Equity account as the offset for the difference between the two columns.
  • Click Save & Close.
  • Create balances for accounts receivable, accounts payable, sales tax payable journal entries or any other account not included in the first journal entry.
  • Pass a final journal entry to distribute remaining balance in the opening balance equity account to other equity accounts and retained earnings as appropriate.

Using the Register

If transactions are already in the account, you have to go to the account register to enter the opening balance.

  • Select Chart of Accounts, From the Company menu
  • Select an account and enter the opening balance, and then select Use Register from the Edit drop-down list,
  • Complete the fields for the new transaction as follows:
    • Date: Date of the opening balance.
    • Number/Type: Leave blank.
    • Payee: (Optional) Type Opening Balance.
    • Account: Choose Opening Bal Equity.
    • Payment or Deposit: Enter the positive amount of the opening balance in the Deposit field, and negative in the Payment field.
  • Click Record.

Income and Expense accounts

There is no option to enter an opening balance for income and expense accounts as the balances for these accounts come from transactions you enter such as checks, bills or invoices.

Customers and vendors (A/R and A/P)

For outstanding balance before your start date:

If there is any remaining balance of customer or vendor before the start date, use any of the following options to record the balance.

Option 1: In the Opening balance field Enter the outstanding balance with the As of date equal to your start date. The opening balance entries track on the Uncategorized Expense (vendors) and Uncategorized Income (customers). If you want to set up jobs for customers, enter opening balances instead of individual jobs. The customer name will reflect the total balance for all its jobs. The opening balance field will be available only when you add new customers or vendors.

Option 2: Create an option Opening Balance and use the option invoices and bills to create opening balances for customers and vendors. Using this option helps you determine which account entries you want to track.

Option 3: Enter an individual bill or unpaid invoice instead of a total balance for each customer and vendor. The transactions will display in open balance for vendors and customer, which are unpaid. And those balances will collectively display in A/R and A/P opening balances. If you need to keep track of individual sales or bills that make up your customer and vendor opening balances then This option is particularly helpful

For transactions that occurred after your start date

You can understand the forms to enter the suitable individual transaction If the transactions of customer or vendor occurred on or AFTER your start date.

  • Sales receipts
  • invoice
  • Customer returns
  • Customer payments
  • Deposits
  • Sales tax payments
  • Vendor bills
  • Vendor credits
  • Bill payments

How to Edit Opening Balance?

Bank, credit card, and other balance sheet accounts

  • Select Chart of Accounts, From the Lists menu
  • Double click the account with an opening balance you need to edit.
  • Find the opening balance transaction from the registered Account.  It’s usually the first transaction and has Opening Bal Equity in the Account field.
  • Edit the date and amount (if necessary).
  • Click Record to save the changes.

Income or expense accounts

  • Select Chart of Accounts, From the Lists menu,
  • Double click the expense or income account you want to edit.
  • In the Account QuickReport, change the date to your start date. select All in the Dates drop-down and then search the report for the correct If you are unsure of the start date, transactions, which are typically among your first transactions.
  • float the mouse over a transaction until a magnifying glass appears then double click to QuickZoom the transaction
  • If any changes affect a journal entry, remember that a General Journal Entry transaction wants total debits equal total credits.
  • Click OK.

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