Opening Balance Entries

Setting Up Opening Balances In QuickBooks

I have 3 opening entries from last year's income tax return to setup for a sole proprietor "electrical contactor" (a friend yes) in QuickBooks.

I made a deposit to the bank (owner's draw) for the opening balance to the bank.

I used a journal entry to debit inventory and credit COG's sold materials purchases for the opening bal for inventory.

I am having problems figuring out how to do the opening balance for an auto class 10.1 vehicle. Can I do a journal entry debiting the fixed asset account Auto Class 10.1 and credit owner's drawings for this opening balance?

Generally, I find it easiest to make two journal entries to enter the opening balances ... one for the assets and one for the liabilities.

The reason I divide it into two entries is because you can't have accounts receivable and accounts payable in the same journal entry.

Do not enter Owner's Equity when doing your setup.

The offsetting entry in each journal entry is QuickBooks Opening Balance Equity account.

Once complete, if you have setup your books correctly, the balance in this account should equal your Owner's Equity balance.

IF you are balanced, make a final journal entry to reclassify the Opening Balance Equity account balance to the Owner's Equity account. Then go in and make the Opening Balance Equity account inactive so it cannot be used again.

When setting up opening balances, no amounts should be posted to income statement accounts.

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

I apologize to my readers ... but while converting this submission to upgraded software, I lost all comments associated with this posting. The post was originally submitted in the spring/summer of 2011. Lake

Comments for Opening Balance Entries

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Mar 20, 2013

When to Enter Opening Balances
by: Cee, B.C.

Good morning all,

I have a new client who is getting his income tax done- as we speak-for 2011 and 2012, Sole Proprietor.

He ran his company on a very fancy spreadsheet and the accountant will use the info needed to do his taxes.

The client now wants to have his business on QuickBooks.

Can I start entering his data for 2013? Or do I have to wait until his taxes are done? I'd like to have his accounts PST/GST ready come April 1st.

Also, can I do journal entries from trial balance's for both years and create a 2 year history of his company?

Thanks so much again Lake for the wealth of knowledge you provide. I am on your site a ton and learn something new every time. You are smart!!

CeeCee,

1. Yes you can start entering the 2013 before you have our opening balances.

2. Yes you can enter the trial balance for both years so you have comparative figures for the prior years ... but not a history. If you wanted a history, you have to enter all the transactions for the two years ... which would probably have a low value to your client ... i.e. not something your client would be willing to pay for.

2a. Enter your 2011 trial balanceas at December 31, 2011.

2b. Enter your 2012 numbers by booking the lump sum DIFFERENCE between the 2012 trial balance and the 2011 trial balance ... using the appropriate QuickBook forms for A/R, A/P, etc. where possible and a journal entry for the remaining numbers. Use December 31, 2012 as your entry date.

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