How do you enter opening balances?

Entering Opening Balances

When establishing a new accounting system, it is important to enter accurate opening balances for all accounts. These balances represent the financial position of the company at the start of the new system and are crucial for generating accurate reports.

Determining the Type of Account

Before entering the opening balance, it is essential to identify the type of account it is for. This can be a bank account, credit card account, asset account, liability account, or other types of accounts. The method of entering the opening balance will vary depending on the account type.

Entering Opening Balances for Bank or Credit Card Accounts

1. Gather bank statements or sign in to your bank’s website to obtain the necessary information.
2. In QuickBooks Desktop, go to the Company menu and select Chart of Accounts.
3. Right-click anywhere on the Chart of Accounts and choose New.
4. Select Bank or Credit Card as the account type and continue.
5. Provide a name for the account and fill out the required fields.
6. Select Enter Opening Balance and enter the appropriate information based on how you want to handle past transactions:
   • If you don’t plan to enter older transactions, enter the ending balance and ending date from your most recent bank statement.
   • If you want to enter your past transactions in detail, decide how far back you want to go and enter the date and balance for that date.
7. Save and close the account.

Entering Opening Balances for Asset, Liability, and Other Types of Accounts

1. Obtain the required information from bank statements or online banking.
2. In QuickBooks Desktop, go to the Company menu and select Chart of Accounts.
3. Right-click anywhere on the Chart of Accounts and choose New.
4. Select the appropriate account type (e.g., Fixed Asset, Loan, Equity, or Other Account Types) and continue.
5. Provide a name for the account and fill out the required fields.
6. Select Enter Opening Balance and enter the necessary information based on how you want to handle past transactions:
   • If you don’t plan to enter older transactions, enter the ending balance and ending date from your most recent bank statement.
   • If you want to enter your past transactions in detail, decide how far back you want to go and enter the date and balance for that date.
7. Save and close the account.

Alternative Method: Creating a Journal Entry for the Opening Balance

As an alternative to the main method, you can enter the opening balance as a journal entry. This can be complicated and it is recommended to work with an accountant if you decide to do this.

1. Go to the Company menu and select Make General Journal Entries.
2. Set the date for the journal entry, which should be the same as the opening balance date.
3. Select the account for which you are entering the opening balance.
4. Enter the opening balance amount in the appropriate column (debit for assets, credit for liabilities and equity).
5. Add a line for the Opening Balance Equity account and enter the same opening balance amount in the opposite column.
6. Save and close the journal entry.

Checking the Opening Balance Entry

After entering the opening balance, it is important to check its accuracy. Go to the account register and ensure that the opening balance is correct. The Opening Balance Equity account should have a zero balance. If there is a remaining balance, work with an accountant to correct it.

References

• Enter opening balances for accounts in QuickBooks Desktop
• Enter and manage opening balances in QuickBooks Online
• About opening balances

FAQs

What is an opening balance?

An opening balance is the financial position of an account at the start of a new accounting period. It represents the balance carried over from the previous period or the initial balance when a new account is created.

Why is it important to enter accurate opening balances?

Accurate opening balances are crucial for generating correct financial reports. They provide a starting point for tracking transactions and ensure that the accounting system reflects the true financial position of the company.

How do I enter an opening balance for a bank account?

To enter an opening balance for a bank account, you will need to gather information from your bank statement or online banking. In your accounting software, create a new bank account and select the option to enter an opening balance. Enter the balance as of the start date of your new accounting period.

How do I enter an opening balance for an asset account?

To enter an opening balance for an asset account, you will need to determine the value of the asset as of the start date of your new accounting period. This information can be obtained from purchase invoices, receipts, or other relevant documentation. Create a new asset account in your accounting software and enter the opening balance.

Can I enter opening balances for all types of accounts?

Yes, you can enter opening balances for all types of accounts, including bank accounts, credit card accounts, asset accounts, liability accounts, and equity accounts. The method of entering the opening balance may vary depending on the account type.

What if I don’t have all the information to enter opening balances?

If you don’t have all the information to enter opening balances, you can estimate the balances based on available records or consult with an accountant. It is important to note that estimated opening balances may affect the accuracy of your financial reports.

How do I check if my opening balances are correct?

After entering opening balances, it is important to check their accuracy. You can do this by reviewing the account registers and ensuring that the opening balances match the balances on your bank statements or other supporting documentation.