Opening Balance Equity

This item was about 2K in 2016, as per bookkeeper records, how do I find if this number is correct? I'm doing an s-corp.

What's the other side of the entry?

There should never be an amount in an account called "Opening Balance Equity". That's a placeholder that QuickBooks creates.

What's the other side of the entry?

I don't know it is on the Balance Sheet under Equity, it is called Opening Balance Equity.

There should never be an amount in an account called "Opening Balance Equity". That's a placeholder that QuickBooks creates.

Thanks I am reading the same online. Should I just zero it out, does it go against any other account?

Thanks I am reading the same online. Should I just zero it out, does it go against any other account?

That's why asked about the other side. I'm not sure how far along you are in the process of cleaning up the books but there was an offsetting side to the entry. If I were looking at it, I would want to know where the other side of the entry is to figure out where to go from there.

Thanks I am reading the same online. Should I just zero it out, does it go against any other account?

That's why asked about the other side. I'm not sure how far along you are in the process of cleaning up the books but there was an offsetting side to the entry. If I were looking at it, I would want to know where the other side of the entry is to figure out where to go from there.

This came from bookkeeper so I would not know, but it strikes me it's from cash and security deposit.

Cash xxx
Total Checking/Savings xxx
Total Current Assets <$100
(same number for all)

Fixed Assets
Accumulated Depreciation xxx
Furniture and Equipment xxx
Leasehold Improvements xxx
Total Fixed Assets xxx

Other Assets
Accumulated Amortization xxx
Initial Franchising Fee xxx
Security Deposit <$3000
Total Other Assets xxx

Total Assets xxx

Liabilities
A/P Amex xxx
Due to/From Shareholders xxx
Shareholders loan (xxx)
Total Liabilities xxx

Equity
Opening Balance Equity xxx
Retained Earnings (xxx)
Net Income (xxx)
Total Equity (xxx)

Total Liabilities and Equity xxx

Opening balance equity is an account that should not exist. A balance there means there is a bookkeeping error.

Look at the very first entries in the GL, all the way back to day one, should tell you what you need to know. I'd start with the checking account.

GST...don't take this the wrong way, but when you don't know about that account, you probably have no clue about QB. That entry gets created by QB when an entry is getting made incorrectly.....so you have to find out what it was. And it's an alarm bell that the rest of the file might be a mess as well....if you don't know QB well, get someone who does to help you and get some training. I'd be wary of filing a return based on shoddy info that you can't clean up....

GST - do you have a QB data file or just the print out of the balance sheet? Often during the year client's will post to Opening Balance Equity because they don't know where else to put something. If it wasn't there last year, something like that probably happened and you need to have the data file to know what to ask the client. If it was there last year, then you still need the data file so you can trace where it came from, if it's a prior year error like I just mentioned, or if it started with the opening balances when QB was started.

Opening balance equity is an account that should not exist. A balance there means there is a bookkeeping error.

GST...don't take this the wrong way, but when you don't know about that account, you probably have no clue about QB. That entry gets created by QB when an entry is getting made incorrectly.....so you have to find out what it was.

That's inaccurate information (don't take this the wrong way). The OBE account is not tied to making "incorrect entries" at all. It serves an important function during initial account set up. It should be cleared out in the normal course of setting up a company file, but does not in and of itself necessarily cause problems if not.

From a recent QB certification training manual:

"Opening Balance Equity – This account is present in all new files. Every time you add a new account and enter an opening balance in the new account window, QuickBooks records the second half of the entry into this account. Once you have entered all of the accounts and balances, you use a journal entry to allocate the amount in Opening Balance Equity to the correct equity account. If QuickBooks is set up correctly, there should never be a balance in this account."

OBE is a clearing account of sorts and should not have a balance at year-end. If the account has current year transactions you should be able to trace back and correct easily as others on the forum have suggested. If the entry originates from a prior year there is a prior period adjustment required to reconcile and get the balance to zero at ye. Honestly, I close prior year OBE entries to equity as this is basically what happens when the books are closed. If the error was in the cash account it should have been picked up during the bank reconciliation. If the error was a security deposit refund and cash is correct likely there was no security deposit asset account set-up initially; instead the funds were posted to rent expense thereby creating confusion when refunded - no asset account to reduce. If this happened in a current year I would correct by reducing rent expense. If a prior year I would correct with an aje to equity unless the amount is deemed material to the extent an amended return is warranted.