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haskenazi1
February 24, 2019
Question

Opening Balance Equity and Retained Earnings

  • February 24, 2019
  • 10 replies
  • 53 views

We have an Opening Balance Equity account with a significant balance and last entry on Dec 31 2015. This is probably from when our new bookkeeper at that time began using QB for us which makes sense

 

However we also have a retained earnings account with zero balance.

 

Does this make sense? Shouldn't the Opening Balance Equity account have been transferred to Retained Earnings at some point?

 

And shoudn't subsequent Equity Distributions to the 2 partners have reduced that Opening Balance Equity account?

 

10 replies

Rustler
Rustler
Level 15
February 24, 2019

OBE should have been cleared to partner equity with a journal entry

debit OBE for the full amount
credit partner one equity for his share
credit partner two equity for his share

 

RE does not clear to OBE at all

RE is last years net profit, and you clear that to partner equity too

debit RE for the full amount
credit partner one equity for his share
credit partner two equity for his share

 

As to why RE has a zero balance, that is hard to say from here. I would first look at the detail of each partner equity account to see if the full amount (last years net profit)  posted to one of them instead of RE, if so get back to me and I can explain why and how to fix that intuit blunder.

H
haskenazi1Author
March 8, 2019

Thanks for your reply

 

So to clarify, OBE does not get posted each year...only the first time upon setup - unless a brand new company of course. From then on out, Equity goes to retained earnings which transfers to partner's equity at the end of the year...that correct?

AlcaeusF
AlcaeusF
Level 14
March 8, 2019

Hello, @haskenazi1.

 

It's nice to see you again in the Community. Allow me to chime in for a moment and share some additional information about Retained Earnings in QuickBooks Online (QBO).

 

Yes! That is correct. To transfer retained earnings to partner's equity, you can follow the sample entry provided by @Rustler above.

 

Just in case, can also check out these article for future reference:

 

 

That should answer your question. Please post again in the Community or leave a comment on this thread if you have any follow-up concerns. Take care and have a wonderful rest of the day!

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