Ever wondered about the significance of the opening balance in QuickBooks? It’s more than just a number – it sets the tone for your financial journey. Learn the ins and outs of entering or editing the opening balance in QuickBooks Desktop as we guide you through the essential steps. Get ready to kickstart your financial period or year with confidence.
In this article, we will discuss the necessary details to be kept in mind before opening balances in QuickBooks, what to do after entering opening balances and handling other accounts.
Important Points to Remember Before We Start
1. It’s advisable to consult with an accounting professional before diving into opening balance entries for your QuickBooks. Press the F1 key or click on the ‘Should I enter an opening balance?’ link during setup for valuable insights.
to resolve your query in no-time.
2. Only enter the opening balance if you have a balance before the QuickBooks start date to ensure accurate financial tracking.
3. Enter opening balances using General Journal Entries (GJE) created from the previous fiscal year’s Balance Sheet when starting a new company at a later date. Keep the following in mind:
- Use the Opening Balance Equity account as the offset to maintain balance.
- For balances from the beginning of the year, input the previous year’s retained earnings instead of individual income, expenses, and cost of goods sold.
- Use separate journal entries for each accounts payable or receivable transaction.
- Include vendor or customer names in the names column of journal entries for accounts receivable, sales tax payable, and accounts payable.
4. Opt for the Inventory Adjustment screen over a journal entry when adjusting inventory quantity and value for a streamlined process.
Key Notes for Opening Balance in QuickBooks
Want to start a financial journey with QuickBooks Desktop? Choose a launch day for your new account and align it with your real-life bank transactions. Input the exact balance from your bank account on that chosen day – it’s your financial kick-off! This starting point is the coveted opening balance, capturing all previous transactions. Before we get into the step-by-step process of learning how to Open Balance in QuickBooks, here are some important points you need to keep in mind.
1. The dates you input signify the starting point for tracking financial transactions in QuickBooks, setting the stage for effective financial management.
2. QuickBooks crafts the opening balance in the balance sheet account, ensuring a solid foundation for your financial records from the get-go. This includes the recording of Opening Balance Equity for a comprehensive balance sheet.
3. Opening Balance Equity signifies the earnings not yet distributed among company owners. QuickBooks further computes your fiscal year-end profit or loss, neatly encapsulated in an equity account known as Retained Earnings.
How to Enter an Opening Balance in QuickBooks Desktop
For Bank or Credit Card Accounts:
In QuickBooks, smoothly record your opening balance by following these steps:
1. Click on “Chart of Accounts” in the Company menu.
2. Right-click and choose ‘New’ in the window that appears.
3. Select the account type – whether it’s Bank or Credit Card.
4. On the ‘Add New Account‘ screen, fill in all the necessary details.
5. Click the “Enter Opening Balance” button. Note: It’s only available if no transactions are entered. Once a transaction is added, it becomes the “Change Opening Balance” button.
6. Input the ending date and balance from your credit card or bank statement.
7. Click ‘OK’.
8. Finally, hit ‘Save & Close‘.
Pro tip: When selecting an account type, ensure all outstanding transactions are accounted for to maintain future reconciliation accuracy.
Important Points to Remember Before Adding Opening Balances
Once you’ve successfully tackled the task of entering opening balances, the next steps are crucial for maintaining financial precision.
Begin by extracting the ending balance from your bank statement, factoring in outstanding checks while adjusting for any outstanding deposits. Inscribe a journal entry, executing a debit to the bank or credit card and a credit to the opening balance equity.
Now select ‘Make General Journal Entries‘ from the Company menu in QuickBooks Desktop. Assign a date and journal entry number, then proceed to designate the bank or credit card account in the Account column, inputting the amount calculated in Step 2 into the Debit column.
Subsequently, opt for ‘Opening Balance Equity‘ from the drop-down menu in the Account field for the next line. Here, in the credit column, input the calculated amount.
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What about Other Balance Sheet Accounts?
To refine the process further, create checks and deposits utilizing the Opening Balance Equity, entering all outstanding transactions. This approach ensures that your data remains available for reconciliation without impacting the prior balance sheet. Conclude this comprehensive procedure by reconciling the opening balance journal entry for each account through mini reconciliation—a streamlined method tailored for efficiency.
When dealing with Equity, Fixed Assets, Other Assets, Current Assets, and Other Current Liabilities in QuickBooks, exercise caution to avoid inadvertently creating duplicate accounting entries. QuickBooks treats both Accounts Payable and Accounts Receivable as distinct entities.
Through the Chart of Accounts:
- Go to the Company menu, click on Chart of Accounts, and initiate the creation of a new account by right-clicking anywhere on the window that appears.
- In the ensuing Chart of Accounts window, select the appropriate Account Type.
- In the Add New Account screen, diligently fill in all necessary details before clicking the “Enter Opening Balance” button.
- Specify the opening balance amount and its date, ensuring it predates the QuickBooks start date. Click ‘OK,’ then ‘Save and Close.’
Entering opening balances in QuickBooks using the Chart of Accounts provides a structured approach to ensure accuracy.
Using a Journal Entry:
- Select ‘Make General Journal Entries‘ from the Company menu, and set the date while entering the required journal entry number.
- In the subsequent steps, choose the account to enter, aligning it with their order on the balance sheet or trial balance.
- Depending on the account type, input the balance as a positive amount in the appropriate column – Debit for Asset accounts and Credit for Liability and Equity accounts.
- Repeat these steps for each account, ensuring the total amount in the Debit and Credit columns matches.
- Use Opening Balance Equity as an offset if discrepancies arise. Click ‘Save and Close.’
- Additionally, for accounts payable, accounts receivables, and sales tax payable, create an extra journal entry.
- Conclude the process with a final journal entry to distribute any remaining balance in the opening balance equity account among other retained earnings and equity accounts as desired.
Through the Register:
For accounts with existing transactions, access the account register to input the opening balance.
- Click on ‘Chart of Accounts‘ from the Company menu, select the desired account, and opt for ‘Use Register‘ from the Edit drop-down list.
- Complete the required fields for the new transaction, specifying the date of the opening balance, leaving the Number/Type section blank, and designating ‘Opening Balance‘ as the Payee (optional).
- Choose ‘Opening Balance Equity‘ as the account, and in the Payment or Deposit field, enter the opening balance accordingly.
- Click ‘Record.’
This method ensures accuracy when dealing with accounts with transaction history.
Income and Expense Accounts:
For income and expense accounts, there is no need to manually enter balances. The balances for these accounts derive from transactions such as bills, invoices, and checks, eliminating the need for separate opening balance entries.
Customers and Vendors
1. Outstanding Balances Before Your Start Date:
If any of your customers or vendors carry an outstanding balance predating your commencement date, consider the following options:
Option 1: Embed the outstanding balance in the Opening Balance field, aligning it with your start date. These entries diligently track to Uncategorized Income or Expense. If you’re setting up jobs for customers, you can input opening balances for individual jobs. Note that the opening balance field is accessible only when adding new customers or vendors.
Option 2: Craft opening balances for vendors and customers by creating a new opening balance item. Employ this item in your invoices to precisely designate the account for tracking entries.
Option 3: Instead of inputting the total balance for each customer or vendor, opt for entering individual unpaid bills or invoices. This method ensures that all outstanding transactions contribute to open balances for vendors and customers, consequently reflecting in A/R and A/P opening balances. This approach provides a detailed breakdown of the sales and bills of your vendor and customer opening balances.
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2. Transactions Occurring after Your Start Date:
For transactions transpiring on or after your start date, QuickBooks offers the flexibility to utilize standard forms, enabling the entry of individual transactions. This includes a spectrum of financial activities such as bill payments, deposits, sales tax payments, vendor bills, vendor credits, invoices, sales receipts, customer payments, and returns.
Conclusion
We hope this article will help you record an opening Balance in QuickBooks Desktop easily. Once again, make sure you do not skip the important points mentioned at the beginning of the article. Even though we have tried to simplify the procedure for you, it’s natural to have more questions. In case you have any related queries, feel free to reach our experts at our Toll-Free number at +1-855-875-1223.
Frequently Asked Questions
To enter opening balances in QuickBooks Desktop, follow these steps:
1. For Bank or Credit Card Accounts:
1.1: Go to the Company menu and select Chart of Accounts.
1.2: Right-click anywhere on the Chart of Accounts and choose New.
1.3: Select the account type (Bank or Credit Card) and proceed.
1.4: Enter the account details, then click “Enter Opening Balance.”
1.5: Input the balance based on your chosen method (ending balance from the latest statement or detailed transaction history)
1.6: Save & Close to finalize.
2. For Assets, Liabilities, and Others:
2.1: Similarly, go to Chart of Accounts and create a new account.
2.2: Choose the account type (Fixed Asset, Loan, Equity, etc.) and proceed.
2.3: Enter the account details and click “Enter Opening Balance.”
2.4: Input the opening balance based on your preference (ending balance or detailed transactions).
2.5: Save & Close.
3. Alternative: Journal Entry for Opening Balance:
3.1: Navigate to ‘Make General Journal Entries’ under the Company menu.
3.2: Set the date and assign a journal entry number.
3.3: Choose the bank or credit card account in the Account column and input the calculated amount in the Debit column.
3.4: On the next line, select ‘Opening Balance Equity’ in the Account field from the drop-down menu.
3.5: Enter the calculated amount in the Credit column.
3.6: Save & Close to complete the process.
Recording opening balances involves creating new accounts in the Chart of Accounts and inputting the initial balances for accurate financial tracking. Follow the specific steps mentioned for bank or credit card accounts and other asset/liability accounts.
Entering opening balances requires accessing the Chart of Accounts, creating new accounts, and inputting the initial balances based on your preferred method (ending balance or detailed transactions). For specific steps, refer to the instructions provided earlier for different account types.
The journal entry for opening balances involves navigating to ‘Make General Journal Entries’ under the Company menu. Set the date, choose the account type, input the amounts in the Debit and Credit columns, and save to record the opening balance accurately. This method is particularly useful for detailed tracking and reconciliation.
