Should I move Opening Balance Equity to Unrestricted Net Assets for a non profit?

Steven-Schoch · ‎December 10, 2018

When I set up a new QuickBooks file for an (existing) non profit, I entered the opening balance for the checking account, which went into "Opening Balance Equity". From reading other questions here, I learned that Opening Balance Equity is supposed to be a temporary account, and that the balance should be moved to another equity account.

The only other equity account I have is "Unrestricted Net Assets", but when I move it there, I get a warning that says:

"You are about to post to the Retained Earnings account 'Unrestricted Net Assets'....and in most cases you should post to another equity account"

Should I continue at this point? There is no reason to create yet another equity account because this is a non profit. It has 2 equity accounts. Which one should have the opening balance?

PaulaS · ‎December 10, 2018

Hi Steven!

You may've found your answer already, but in case you haven't here, hopefully this will help.

QB is very special, because it creates an "Opening Balance Equity" account, which is useless. More often than not, someone makes an adjustment to correct it. You are that person this time.

IF the funds you entered as the opening balance for the checking account are unrestricted, then yes. Simply make a journal entry moving the opening balance from the OBE account to your Unrestricted NA account. This will bring the OBE to zero and you'll be able to reconcile your net assets.

If you've any questions, feel free to ask!

View solution in original post

PaulaS · ‎December 10, 2018

Hi Steven!

You may've found your answer already, but in case you haven't here, hopefully this will help.

QB is very special, because it creates an "Opening Balance Equity" account, which is useless. More often than not, someone makes an adjustment to correct it. You are that person this time.

IF the funds you entered as the opening balance for the checking account are unrestricted, then yes. Simply make a journal entry moving the opening balance from the OBE account to your Unrestricted NA account. This will bring the OBE to zero and you'll be able to reconcile your net assets.

If you've any questions, feel free to ask!

Laura-B · ‎December 10, 2018

Hi Paula. So I am looking to balance my OBE to zero on nonprofit books that go back to the beginning of 2012. There are 3 type of income accounts that OBE was applied to when starting with QB's. Will I have to do 3 separate or can I do one lump sum? Is it better to do it at the end of this 2016 year coming up or now? And will this be an exceptable form of fixing the problem? And one more, can the same be done on a Canadian nonprofit as well? Thank you.

qbteachmt · ‎December 10, 2018

Equity is Equity; closing OBE to a different Equity account changes Nothing except it allows you to Tidy Up.

qbteachmt · ‎December 10, 2018

You have to determine if all of that Equity really is Unrestricted or not. It might be split into Unrestricted and some sort of Restricted Reserve.

Just because you get a Warning does not prevent you from continuing. It just asks you to consider if this is the right entry.

Steven-Schoch · ‎December 10, 2018

Thanks for the helpful answers! I used them to solve the problem in a slightly different way:

Since the file is relatively new, I simply edited the first entries in the checking and savings accounts, and changed "Opening Balance Equity" to "Unrestricted Net Assets".

Then I deleted the useless "Opening Balance Equity" account, since there were no entries in it.

Then, since this non profit has never, and probably never will, receive restricted contributions, I renamed "Unrestricted Net Assets" to simply "Net Assets", which will undoubtedly avoid questions at the next board meeting.

qbteachmt · ‎December 10, 2018

"I simply edited the first entries in the checking and savings accounts, and changed "Opening Balance Equity" to "Unrestricted Net Assets"."

Exactly. Never use the "Beginning Balance" fields. They never asked you for Real Accounting info.

"Then I deleted the useless "Opening Balance Equity" account, since there were no entries in it."

Or, it comes back. Don't worry about it, as long as it shows 0.

"Then, since this non profit has never, and probably never will, receive restricted contributions, I renamed "Unrestricted Net Assets" to simply "Net Assets", which will undoubtedly avoid questions at the next board meeting."

Yes, exactly. I also know it is now being called Net Fund Balance.

Steven-Schoch · ‎December 10, 2018

"Or, it comes back."

You're right. It's an undead account.

Vitan · ‎December 10, 2018

@qbteachmt where do I find this "Net Assets" or "Net Fund Balance" Account? I can't find it in Chart of Accounts when I select "New" , its not under "Other Assets" or "Other Current Assets". How would I input "Net Assets"into Chart of Accounts?

qbteachmt · ‎December 10, 2018

There is Account NAME, and account Type.

Type = Equity.

Name = the program makes one, already. Double-click each Equity account from the chart of accounts. The one that doesn't open as a register view, but as a Report, is this account, no matter what it is Named.

The Function of Equity is Net Assets. The Accounting Formula is Assets = Liability + Equity. Turn that around:
Assets minus Liability = Net Assets (difference)
That's why these are Synonyms for Equity:
Retained Earnings
Owner Equity
Unrestricted Net Assets
Fund Balance

nicnac101 · ‎August 18, 2019

So if I needed to move money from the OBE to a restricted account (say Net Assets With Donor Restrictions), how would I do that? Do I need to create a new equity account? If so, what name should I select from the list?

Topics

Training

Community

Resources

Should I move Opening Balance Equity to Unrestricted Net Assets for a non profit?