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Community Explorer **

Opening Balance Equity is throwing off Reconciliation

I'm having dificulties understanding the Opening Balance Equity and how to address it when I reconcile bank and credit card accounts in QB.

I'm trying to reconcile QB for the first time, and the OBE is throwing me off. For example, a bank account has an OBE of $300, which I assume was input during the inital set up of this QB (I did not perform this myself). However, QB also downloaded the account's beginning balance of $300 from the bank automatically. This was the only "transaction" on this statement.

The OBE shows up as "Reconciled" on the register of the bank account. When I go to reconcile, I'm shown a beginning balance of $0. When I try to reconcile the one transaction of $300 as downloaded from the bank, I'm shown a deposit of $300 and a difference of -$300. It only balances when I uncheck the $300 line item.

I also went back and tried marking the OBE as unreconciled on the register, but that still leaves $300 floating around when I try to do the reconcilation. I don't know what my next step should be!

Solved
Best answer 01-17-2018

Accepted Solutions
ProAdvisor

Re: Opening Balance Equity is throwing off Reconciliation

@mniver

 

"I assume was input during the initial set up of this QB"

 

Since you've duplicate opening balance entries (one from the chart of accounts and another one from connecting to a bank account), you will need to delete one, preferably from the initial set up of QB.

 

From the homepage dashboard > Accounting > Opening Balance Equity Account > View Register under Action column > Locate OBE transaction and click the transaction row > Click Edit > choose Delete (under More at the bottom).

View solution in original post

20 Comments
ProAdvisor

Re: Opening Balance Equity is throwing off Reconciliation

@mniver

 

"I assume was input during the initial set up of this QB"

 

Since you've duplicate opening balance entries (one from the chart of accounts and another one from connecting to a bank account), you will need to delete one, preferably from the initial set up of QB.

 

From the homepage dashboard > Accounting > Opening Balance Equity Account > View Register under Action column > Locate OBE transaction and click the transaction row > Click Edit > choose Delete (under More at the bottom).

View solution in original post

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

Can you help me to understand and manage Opening Balance Equity and capital accounting?  I am new to QuickBooks Desktop and not an accountant (though I understand finance).  I keep the books for a 40-year-old self-managed homeowners association (non-stock).  We converted to QuickBooks Desktop midyear 2018.  My year-end 2018 balance sheet correctly showed an Opening Balance Equity (at year-end 2017) plus Temporary Restricted Net Assets plus Net Income equalling Total Equity.  On my 2019 monthly balance sheets, I would have expected the year-end 2018 Total Equity (perhaps less the Temporary Restricted Net Assets but including the Net Income) to be my Opening Balance Equity (i.e., at January 1, 2019), but it isn't.  Instead QuickBooks is still showing my 2018 Opening Balance Equity unchanged plus  carried-forward Temporary Restricted Net Assets plus 2018 Net Income (which it calls Unrestricted Net Assets) plus Net Income (for 2019) equalling Total Equity.  The bottom line is correct, but the presentation puzzles me.

 

Do I have to do something manually to move 2018 Net Income to Opening Balance Equity for 2019?  Is there something else I should be doing?

QuickBooks Team

Re: Opening Balance Equity is throwing off Reconciliation

Hello there, @reolsen.

 

Welcome to the Community space. I can share some information how QuickBooks calculates the opening balance equity.

 

At the end of your fiscal year, QuickBooks computes your profit (or loss) into an equity account named Retained Earnings. The program automatically creates a closing entry based on your accounting period. It carries over your previous year's balance. This way you don't have to manually move amounts.

 

Since the amounts didn't move yet, let's try to check your fiscal year:

  1. Click Company.
  2. Choose My Company.
  3. On the My Company window, click the Edit.
  4. Go to the Report Information tab.

 

For more insights about the accounts in QuickBooks, please check this link.

 

I'm still here to help you more if you have follow-up questions about accounting. Just add a comment or mention my name. Have a good one.

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

HoneyLynn_G, thank you for introducing me to this screen.  I confirmed my association's fiscal year and tax year -- first month for each is January -- and changed a mistaken reference to our federal income tax form from 990 to Other (it's 1120-H in fact).  But when I created a new balance sheet prev year comparison, no line items had changed.  There was no retained earnings account -- just, unrestricted net assets, as before -- and the opening balance equity continued unchanged for both 2019 and 2018 at the year-end 2017 value.  Any other thoughts?

QuickBooks Team

Re: Opening Balance Equity is throwing off Reconciliation

It's my pleasure to help you, @reolsen.

 

I appreciate you coming back to us for additional support and providing extra details.

 

I want to make sure this gets taken care of and you have the best resolution possible. Can you please send me your Balance Sheet reports 2017, 2018, and 2019? It would be easier for me to understand how the values are accumulated and why those items didn't change.

 

Once I have the details, I'll be glad to look into it for you. Looking forward to your response.

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

Thank you, @HoneyLynn_G .  One question: If I attach files to a message, will they be available to you/QuickBooks only, or will all members of this community have access to them?  (Sorry, I'm new here.  Let me know if there is some other way to send you the documents you requested.)

Established Community Backer ***

Re: Opening Balance Equity is throwing off Reconciliation


@reolsen wrote:

 

My year-end 2018 balance sheet correctly showed an Opening Balance Equity

The Opening Balance Equity account is meant to be used as a temporary clearing account when setting up a new file in QB for an existing entity. Once the set-up is complete the balance in this account should be zero and it should never be used again

QuickBooks Team

Re: Opening Balance Equity is throwing off Reconciliation

Hello again, @reolsen.

 

I'm happy to get a notification from you.

 

Attaching files/pictures in the Community will be viewed by all members. The Community is a public space, and we encourage conversation with all experts, users, and accountants.

 

I'll be waiting for your response, reolsen. I'm still here to help you further.

 

 

 

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

OK, @HoneyLynn_G.  Full disclosure.  That's my mantra.  Here are the balance sheets you requested.  To review, we converted from Excel to QuickBooks mid year in 2018 and I manually inserted in QuickBooks the 2018 transactions and year-end 2017 balance sheet values preceding our conversion.

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

@HoneyLynn_G, here's another.

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

@HoneyLynn_G, and the last.

QuickBooks Team

Re: Opening Balance Equity is throwing off Reconciliation

Thanks for the screenshots, Reolsen.

 

You've mentioned that you manually entered some transactions. It's possible that these transactions are incorrectly recorded. For us to resolve the incorrect beginning balance, you can check this article for the steps: Zero or incorrect Beginning Balance in the Begin Reconciliation Window.

 

Please keep us updated. We're just right here to help you. 

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

 

Thank you.  I read the article you suggested.  Then I looked at my chart of accounts.  My only problem is with my ending capital account balances, so I didn't bother trying to balance any bank accounts using the Begin Reconciliation window, but the article pointed me in the right direction. 

 

There are four equity accounts on my chart of accounts -- Opening Balance Equity (which I assumed when I set up my accounts, and computed a balance for it, should be the total equity at year-end 2017), Perm. Restricted Net Assets, Temp. Restricted Net Assets, and Unrestricted Net Assets (which I assume should be Opening Balance Equity, less Perm. and Temp. Restricted Assets, plus Net Income).  See the screenshot attached.  Probably I didn't enter a balance at set up for Unrestricted Net Assets, on the assumption that it would fill automatically.  At any rate the year-end 2017 balances of Perm. and Temp. Restricted Net Assets are correct, but the year-end 2017 balance of Unrestricted Net Assets is showing as zero, and that is clearly incorrect since there were retained earnings at year-end 2017.

 

I think I understand the procedure to make a General Journal Entry to correct the year-end 2017 balance of Unrestricted Net Assets.  Should I do it?  If I do that, should I expect Opening Balance Equity to disappear from my balance sheet?  Should I also expect my 2018 and 2019 Total Equity balances to remain unchanged (even though I am adding a value for Unrestricted Net Assets)? 

 

Should I make any adjustment to year-end Opening Balance Equity account, which in my books is the total of seven individual entries?  See the screenshot that follows.

 

Thanks again.

 

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

@Kristine Mae ,

 

Here is my second screenshot showing the composition of my Opening Balance Equity.

 

Thanks again.

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

@Kristine Mae ,

 

Sorry to send you one more reply.  I suggest you take a look at how I created the Opening Balance Equity at December 31, 2017 -- the line items that I entered to create the balance.  I may have done it incorrectly.  As pointed out above, I certainly did not enter a value for Unrestricted Net Assets.

 

In reviewing my Balance Sheet at December 31, 2017, I see that the Opening Balance Equity figure of $79,794.35 is effectively the value of Unrestricted Net Assets (including Retained Earnings for 2017) at year-end 2017, though it isn't called that.  See the attached.

 

Gosh, I wish QuickBooks Desktop, like my car, had come with a 400-page manual.  I never knew, for example, that there was a procedure to create opening balances.  I just followed my instincts. The result certainly looked right.

 

Bob

Moderator

Re: Opening Balance Equity is throwing off Reconciliation

Thanks a lot for sharing so much details, reolsen.

 

Yes, you'll have to enter a journal entry to correct the opening balance equity.

 

Here's how:

  1. Go to Company at the top, then choose Make General Journal Entries.
  2. Change the date to the correct statement date of your beginning balance (refer to the screenshot below).
  3. On the first line, select the appropriate account from the Account drop-down.
  4. Enter the correct opening balance in the Debit column.
  5. On the second line, select Opening Balance Equity.
  6. Select Save.

image.png

 

Next, do a mini-reconciliation to correct the Beginning Balance.

 

I’d also encourage you to consult with your accountant for the best advice. This is to make sure the figures in your books are accurate.

 

Don't hesitate to let me know if I can be of further assistance to you. Take care.

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

@PreciousB , thank you for that confirmation.  One last question: In making the General Journal Entry to reduce Opening Balance Equity to zero, do I make Unrestricted Net Assets my contra account to move the Opening Balance Equity value there?

Moderator

Re: Opening Balance Equity is throwing off Reconciliation

Hello reolsen,

 

I can see you had a great conversation with @Precious. Allow me to jump in to this thread. 

 

The steps provided help you to fix the opening balance. On the other hand, with regards to creating a contra account (details of the account), it'd be best to consult your accountant. They are the best source of help for any accounting advice. Then, we can guide you how to create it.

 

We can also get some pieces of advice from other users in this forum. Let's see what would their opinion be about this. 

 

If you have other questions, please don't hesitate to post them here. 

Frequent Explorer *

Re: Opening Balance Equity is throwing off Reconciliation

Dear all,

 

Thank you for your assistance.  As you suggested, I used the General Journal Entry screen to debit my Opening Balance Equity by its value on set-up as of December 31, 2017 and to credit Unrestricted Net Assets by the same amount as of the same date.  Opening Balance Equity disappeared and Unrestricted Net Assets appeared as of December 31, 2017, the total capital account balance remaining correct, and my 2018 net income properly rolled into Unrestricted Net Assets in January 2019.  I appreciate all of your help in understanding my confusion between the two QuickBooks accounts at the time of set-up.

Moderator

Re: Opening Balance Equity is throwing off Reconciliation

It's good to see you here again with us, reolsen,

 

You are most welcome! It's our great pleasure to assist you with.

 

For future reference, I'm attaching a helpful article that you can check on: Reconcile in QuickBooks Desktop.

 

If you have further questions concerning QuickBooks Desktop, please feel free to visit us again. Have a great day!

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