Restarting Balance Sheet after Partner Buyout

It's always an exciting time when a business undergoes significant changes. Restarting the balance sheet after a partner buyout is a vital step in ensuring the financial stability and transparency of your company, @CounterCulture.

If you decide to start a new company file, as advised by your accountant, you may need to enter the opening balances for your balance sheet accounts. This process ensures that your financial records accurately reflect the initial state of your business after the partner buyout. Alternatively, if you choose to use the existing subsidiary ledger, you might be able to accomplish this by making a journal entry to transfer the appropriate amounts.

We can create a journal entry to liquidate the partnership as of 8/31/23. The entry should debit all assets, credit all liabilities, and credit the partner's equity accounts for their respective balances. It will zero out all account balances and close the partnership.

Follow the steps below:

1. Select the +New button and select Journal entry.
2. Pick the Opening Balance Equity account in the Account field. Then, debit the amount.
3. Next, on the next line, choose the Owner’s retained earnings or Equity account and credit the same amount.
4. From there, check the amounts. The Credit and Debit columns should have the same value. 
5. Input the details of why you made the journal entry in the Memo field.
6. Once done, select Save and Close.

For reference, please check this article: Create journal entries in QuickBooks Online. 

After that, we need to create an equity account for Partner A's investment and enter the purchase price paid to Partner B as the opening balance. It will establish the equity balance for the new sole proprietorship. We can go to the Chart of Accounts and set up an equity account. 

Refer to the steps below:

1. Go to Settings ⚙, then select Chart of Accounts.
2. Select New.
3. From the Account Type ▼ dropdown, select Equity.
4. From the Detail Type ▼ dropdown, select Owner's Equity or Partner's Equity depending on your situation.
5. Select Save and Close.

Moreover, you may also consider getting some advice from your accountant to keep books accurate and expense accounts to use. Do you want to have one? Visit this article: The ProAdvisor Program.

As you embark on this process, I wish you a smooth transition and a fresh start. May your balance sheet reflect the renewed vision and goals of your business.

Thank you so much! this is exactly what I was looking for!

Hello there, Counter.

Thanks for getting back to us. I'm glad that the answer given by my colleague really did resolve the issue. Anyway, if there's anything else that you need help with, you can always get back to us here in the Community. And we'll surely get you covered. 

The Community is always here 24/7 to assist you. Have a nice day!

How do you do this in Quickbooks desktop version?

Hi there, MWANV. I can show you the steps for restarting your balance sheet in QuickBooks Desktop (QBDT).

When starting a new company file, you may need to enter opening balances for your balance sheet accounts to accurately reflect your business's initial state after a partner buyout. You can use the existing subsidiary ledger and make a journal entry to transfer the appropriate amounts.

Here's how:

1. On the menu, click Company. Then, select Make General Journal Entries.
2. Under the Account field, choose the Opening Balance Equity. Then, debit the amount.
3. On the next line, choose the Owner's retained earnings or Equity account and credit the same amount.
4. Please know that the Credit and Debit columns should have the same value.
5. You can enter any additional details in the Memo field.
6. Once done, click Save and Close.

Furthermore, you can refer to this article to learn how to create a journal entry in QBDT: Create a journal entry in QuickBooks Desktop for Windows or Mac.
 

Once done, proceed to create an equity account and enter the purchase price paid as the opening balance. It will establish the equity balance for the new sole proprietorship. We can go to the Chart of Accounts and set up an equity account.

1. On the menu, click Accountant. Select Chart of Accounts.
2. Click the dropdown arrow on the Account, then click New.
3. From the Account type dropdown, select Equity.
4. From the Detail Type dropdown, click owner's Equity or Partner's Equity depending on your situation.
5. Select Save and Close.

Moreover, you can always consult with a financial advisor or an accountant when dealing with financial transactions to ensure accuracy.

In addition, you can refer to this article to learn how to delete and reverse a journal entry in QBDT: Delete and reverse journal entry in QBDT.

Comment on the post if you still have concern about restarting your balance sheet in QBDT. I'm always here to help you.