How To Create and Record An Opening Balance In QuickBooks Software? - PowerPoint PPT Presentation

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How To Create and Record An Opening Balance In QuickBooks Software?

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Opening balance involves to that amount of money which you have in an account throughout the starting of your Fiscal Year. – PowerPoint PPT presentation

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Title: How To Create and Record An Opening Balance In QuickBooks Software?


1
Opening balance is known as the amount of money
in a companys account at the beginning of a new
financial period or year. This is known as the
first entry that is done when a company starts
its processes or after a year-end. There are
various steps to edit or enter the opening
balance in QuickBooks Desktop. This presentation
details the steps in entering or editing opening
balance in QuickBooks Desktop.
Points to Note
2
  1. It is considered a good option to contact the
    accounting professional always before entering
    the opening balance. While setting up the
    account, you can press F1 key or you can simply
    click on the link that says- Should I enter an
    opening balance?. In this way, you can get
    information about the opening balances.
  2. Also, you must not enter the opening balance, if
    you do not have balance prior to the QuickBooks
    start date.
  3. You are allowed to enter the Opening Balances
    using one or more GJE that you may have created
    from the Balance Sheet for the previous fiscal
    year. This can be done when you start a new
    company with the date later than the actual one.
    You should keep the following points in mind if
    you are using journal entries in order to record
    the opening balances
  • Use Opening Balance Equity account as the offset
    account so that you keep the journal entries in
    balance.
  • When you enter balances from the beginning of the
    year, then you can enter balance for the previous
    years retained earnings instead of entering each
    income, expense and cost of goods sold.
  • Per journal entry, you can enter only one
    accounts payable or receivable transaction.
    Therefore, you need to have multiple journal
    entries to load the balances for these accounts.
  • Do not forget to include the name of the vendor
    or customer in the names column of journal
    entries to accounts receivable, sales tax payable
    and accounts payable.
  • You can choose to use the Inventory Adjustment
    screen instead of entering the Inventory Asset
    Balance through a journal entry so that you can
    adjust both inventory quantity and value.

3
Important
  • The dates you have entered for when your company
    started indicate the period when you would start
    tracking your financial transaction in
    QuickBooks.
  • It is created by QuickBooks when you enter
    opening balance in the balance sheet account for
    the first time. In addition to this, when you
    enter the opening balances, Opening balance
    Equity is recorded by the QuickBooks. This is
    done to ensure that you receive a good balance
    sheet for your company.
  • These are the profits that have not been
    distributed among the companys owners.
    QuickBooks also computes your profit or loss at
    the end of your fiscal year. This is done into an
    equity named Retained Earnings.

Enter opening balance in QuickBooks
Bank or credit card accounts
  • Click on Chart of Accounts from the Company menu.
  • In this window, right click and select New.
  • Then, choose the account type- Bank or Credit
    Card.
  • On the Add New Account Screen
  • Fill all the required details.
  • Click Enter Opening Balance Button. This button
    will only be available if you have not entered
    any transaction yet. As soon as you enter a
    transaction, the button will change to Change
    Opening Balance button.

4
  • Now, enter ending date and ending balance from
    your credit card statement or last bank
    statement.
  • Then, click OK.
  • Click Save Close.

To ensure that all your future reconciliation is
accurate, you would be required to account for
all the outstanding transactions in the credit
card or bank.
After entering opening balances, follow he steps
below
  • Take the ending balance from bank statement and
    increase the amount by any outstanding checks,
    and decrease the amount by outstanding deposits.
  • Enter the journal entry debiting the bank or
    credit card, and crediting opening balance
    equity.
  • Select Make General Journal Entries from the
    Company menu
  • Set the date and enter a number of journal entry
  • Now, choose the bank or credit card account from
    the Account column and enter the amount
    calculated in step 2 in the Debit column.
  • In the next line, click on Account and
    choose Opening Balance Equity from the
    drop-down.
  • Now, in the credit column, put the amount
    calculated.

5
  • Create checks and deposits by using Opening
    Balance Equity and enter all the outstanding
    transactions.
  • This will become available for reconciliation
    without any impact on the prior balance sheet.
  • Now, reconcile the opening balance journal entry
    for each account through mini reconciliation, a
    process to do it.

Other balance sheet accounts
While entering an opening balance for Equity,
Fixed Asset, Other Asset, Current Asset, and
Other Current Liability, be careful as it is
possible that you may create a double accounting
entry. In QuickBooks, both the Accounts Payable
and Accounts Receivable are considered different.
? Through the Chart of Accounts
  • Click on Chart of Accounts from the Company menu
  • Right click anywhere on the window appeared and
    select New, in the Chart of Accounts window
  • Choose the right Account Type
  • In the Add New Account screen
  • Fill all required details.
  • Click Enter Opening Balance button.

6
  • Enter amount of opening balance and the date. You
    can use the date before the QuickBooks start
    date.
  • Now, click Ok.
  • Click Save and Close.

? Using a Journal Entry24
  • Select Make General Journal Entries from the
    Company menu.
  • Now, set the date and enter the number required
    for the journal entry.
  • From the Account column, select the account you
    want to enter.
  • You can also enter the accounts in the order in
    which they appear on the balance sheet or trial
    balance.
  • Depending on the type of account, enter the
    account balance as a positive amount and that
    too, in the right column.
  • For example
  • Positive balances will appear in the Debit
    column, for Asset accounts.
  • For Liability and Equity, these positive balances
    appear in the Credit column.
  • Now, for each account, you shall repeat the steps
    3 and 4.
  • Make sure that once all the balances have been
    entered, the total amount in Debit and Credit
    column is equal. You can use the Opening Balance
    Equity as the offset to check any difference
    noticed between the two columns.

7
  • Click Save and Close.
  • To enter the balance for accounts payable,
    accounts receivables, and sales tax payable
    create an additional journal entries. You can
    also enter any other account that is not included
    on the first journal entry.
  • Now, create a final journal entry in order to
    distribute any remaining balance in the opening
    balance equity account among other retained
    earnings and equity accounts as desired.

? Through the Register
When you have transactions in the account, you
are required to go to the account register so as
to enter the opening balance.
  • Click on Chart of Accounts from the Company
    menu.
  • Choose the account for which you wish to enter
    the opening balance. Then, select Use Register
    from the Edit drop-down list.
  • Fill the following fields for the new
    transaction
  • Date of the opening balance
  • Number/Type- Leave this section blank
  • Payee- Type Opening Balance (Optional)
  • Account- Choose Opening Balance Equity
  • Payment or Deposit In this field, enter the
    opening balance in the Deposit field if it is
    positive and in the Payment field if it is
    negative.

8
  • Click Record.

? Income and Expense Accounts
  • There is no option to enter balance for income
    and expense accounts because the balance for
    these accounts comes from transactions that are
    entered like bills, invoices and checks.

Customers and Vendors  (A/R and A/P)
For Outstanding Balance before your start date
If any of your customer or vendor has an
outstanding balance BEFORE the commencement date,
following options can be used
Option 1 Put the outstanding balance in the
Opening balance field with As of date equal to
your start date. These opening balance entries
will track to Uncategorized Income or Expense.
You can enter opening balance for the individual
jobs in case you are planning to setup jobs for
customers. Moreover, the name of the customer
will reflect the total balance for all the jobs.
Also note that when you add new customers or
vendors, the opening balance field is available
only at that time.
9
Option 2 To create opening balances for vendors
and customers, use the opening balance item that
you will create anew and use the same in
invoices. This will aid in determining the
account you want entries to track to. Option
3 Enter the individual unpaid bill or invoice
rather than entering the total balance for each
of the customers or vendors. All the unpaid
transactions will result in open balances for
vendors and customers. And these will ultimately
result in A/R and A/P opening balances. This
option will help you keep track of all the
individual sales and bills that make up your
vendor and customer opening balances.
For Transactions which occurred after your start
date
When you find that the transactions of the
customer or the vendor have occurred on or after
the start date, then you have an option to use
standard QuickBooks forms so that you are able to
enter the appropriate individual transactions
which include
  • Bill Payments
  • Deposits
  • Sales tax payments
  • Vendor Bills
  • Vendor Credits
  • Invoices and Sales Receipts
  • Customer payments and returns

10
How to Edit Opening Balance?
? Bank, Credit Card and other balance sheet
accounts
  • Choose the Chart of Accounts from the Lists menu
  • Double click on the account that you want to edit
  • Then, find the opening balance transaction
    (usually the first one) in the account register.
    It will also have Opening Balance Equity in the
    Account field.
  • If essential, also edit the date as well as
    amount.
  • Click on Record to save all the changes.

? Income or Expense Accounts
  • Select Chart of Accounts from the Lists menu
  • Double click on the income or expense that you
    wish to edit
  • Change the date to your start date in the Account
    QuickReport. If you dont know the exact start
    date, then you can choose ALL in the Dates
    drop-down.
  • After this, you can search the report for the
    correct transactions that are usually among the
    first transactions.
  • Hover the mouse pointer over a transaction and
    QuickZoom it. As soon as the magnifying glass
    appears, double click on that.

11
  • Do all the required changes. If changes done
    affect journal entry then General Journal Entry
    transaction requires- total debits equal total
    credits.
  • Then, click Ok

We hope that the above given article will aid you
also resolve your query. If you are still in
doubt or have more queries yet then please feel
free to contact our QuickBooks Helpline
Number 1(800)880-6389 and speak with one of our
expert Intuit Certified ProAdvisors.
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