Skip to main content

How to Delete the Opening Balance Equity in QuickBooks Online

· 7 min read
Debits

Introduction​

Opening Balance Equity in QuickBooks Online is a default account created by QuickBooks to balance out opening balances entered for accounts during the initial setup. While it's useful for setting up your books, the Opening Balance Equity account should have a zero balance once all opening balances are correctly entered. If not properly managed, it can cause confusion and impact your financial reporting.

This guide will walk you through the steps to delete or clear the Opening Balance Equity account in QuickBooks Online, helping you maintain accurate financial records.

What Is Opening Balance Equity?​

Opening Balance Equity is a temporary account used to offset discrepancies when entering opening balances in QuickBooks. It serves as a "balancing" account when you input starting balances for accounts such as assets, liabilities, and equity.

Once the correct balances are entered, the Opening Balance Equity account should have a zero balance. Any remaining balance in this account indicates that there may be an error in your initial setup, such as incorrect or missing opening balances. Cleaning up this account is essential for accurate financial reporting.

Why Delete or Clear Opening Balance Equity?​

  1. Accurate Financial Statements: An incorrect balance in the Opening Balance Equity account can distort your Balance Sheet and other financial reports.
  2. Proper Account Setup: Clearing this account ensures that all opening balances are correctly reflected in the appropriate accounts, such as Retained Earnings or Owner’s Equity.
  3. Clean Chart of Accounts: Keeping a zero balance in the Opening Balance Equity account helps maintain a clean and organized Chart of Accounts.

Step 1: Review the Opening Balance Equity Account​

Before deleting or clearing the Opening Balance Equity account, you need to review its current balance and understand why there’s a balance in this account.

1.1: Access the Opening Balance Equity Account​

  1. Log into QuickBooks Online: Use your login credentials to access your QuickBooks Online account.
  2. Go to the Chart of Accounts: Click on the Gear Icon in the top right corner and select Chart of Accounts under the Your Company section.
  3. Search for Opening Balance Equity: Scroll through the list or use the search bar to find the Opening Balance Equity account.
  4. Run a Report: Click Run Report next to the Opening Balance Equity account to review the transactions that have been posted to this account.

1.2: Identify the Transactions​

In the report, you’ll see a list of transactions that were posted to the Opening Balance Equity account. These typically include the initial opening balances for bank accounts, credit card accounts, and other balance sheet accounts.

  • Check for Errors: Review the transactions to ensure that all opening balances are correctly entered.
  • Identify Adjustments: Look for any manual adjustments or entries that shouldn’t be there, such as erroneous journal entries or incorrectly categorized transactions.

Step 2: Correct the Opening Balances​

If there are incorrect transactions or opening balances, you will need to adjust them before clearing the Opening Balance Equity account.

2.1: Correct Bank and Credit Card Opening Balances​

If the Opening Balance Equity account contains entries related to your bank or credit card accounts, you need to adjust the opening balances in these accounts.

  1. Go to Accounting > Chart of Accounts: Navigate to the Chart of Accounts and locate your bank or credit card account.
  2. Edit the Opening Balance: Click View Register for the account and locate the opening balance entry.
  3. Adjust the Balance: Click on the opening balance entry to edit it. Ensure that the correct balance as of the start date is entered.
  4. Save Changes: Once corrected, click Save to update the opening balance.

2.2: Adjust Other Account Balances​

For other balance sheet accounts (e.g., assets, liabilities, loans), ensure that their opening balances are correctly entered. If needed, adjust these balances using journal entries.

  1. Go to + New > Journal Entry: In the left-hand navigation menu, click on + New and select Journal Entry.
  2. Enter the Correct Balances: Input the correct opening balances for the affected accounts. Ensure that the offset is posted to Retained Earnings or another appropriate equity account.
  3. Review the Entry: Double-check the journal entry for accuracy, making sure it properly balances debits and credits.
  4. Save and Close: Click Save and Close once you’ve entered the adjustments.

Step 3: Reclassify or Delete Opening Balance Equity Transactions​

After correcting the opening balances, you may still have transactions remaining in the Opening Balance Equity account. These need to be reclassified to the appropriate equity accounts.

3.1: Reclassify Opening Balance Equity Transactions​

  1. Go to the Report: Return to the Opening Balance Equity report that you ran in Step 1.
  2. Identify the Transactions to Reclassify: Select the transactions that should be moved to another equity account (e.g., Retained Earnings, Owner’s Equity).
  3. Edit the Transaction: Click on each transaction to edit it. Change the account from Opening Balance Equity to the appropriate equity account.
  4. Save the Changes: After reclassifying the transaction, click Save and Close.

3.2: Delete Unnecessary Entries​

If there are any erroneous entries in the Opening Balance Equity account that don’t belong there, you can delete them.

  1. Click on the Transaction: In the Opening Balance Equity report, click on the transaction that you want to delete.
  2. Select Delete: In the transaction window, click the More option at the bottom, then choose Delete.
  3. Confirm Deletion: QuickBooks will prompt you to confirm that you want to delete the transaction. Click Yes to proceed.

Important: Deleting transactions will remove them entirely from your records. Only delete transactions if they were entered by mistake and should not affect your financial reports.

Step 4: Check the Balance Sheet​

Once all transactions have been reclassified or deleted, check your Balance Sheet to ensure that the Opening Balance Equity account is now at zero.

4.1: Run a Balance Sheet Report​

  1. Go to Reports > Balance Sheet: In QuickBooks Online, navigate to the Reports section and run a Balance Sheet report.
  2. Check the Equity Section: Scroll down to the Equity section of the Balance Sheet. The Opening Balance Equity account should now show a balance of $0.00.
  3. Review the Other Equity Accounts: Verify that the amounts in Retained Earnings, Owner’s Equity, and other equity accounts are accurate based on the adjustments you made.

4.2: Resolve Any Remaining Issues​

If the Opening Balance Equity account still shows a balance, revisit the transactions and ensure that all balances have been correctly adjusted and reclassified. Double-check your journal entries and make sure they are posted to the correct equity accounts.

Step 5: Make the Opening Balance Equity Account Inactive (Optional)​

Once the Opening Balance Equity account shows a zero balance, you may want to make it inactive to prevent future transactions from being posted to it.

5.1: Inactivate the Opening Balance Equity Account​

  1. Go to the Chart of Accounts: Click on the Gear Icon and select Chart of Accounts.
  2. Find Opening Balance Equity: Locate the Opening Balance Equity account in the list.
  3. Click on the Dropdown: Next to the account name, click the dropdown arrow and select Make Inactive.
  4. Confirm: QuickBooks will ask you to confirm. Click Yes to make the account inactive.

Conclusion​

Clearing the Opening Balance Equity account in QuickBooks Online is an essential step in maintaining accurate financial records. By ensuring that all opening balances are correctly entered and reclassifying any transactions, you can avoid confusion and ensure that your Balance Sheet reflects the true financial position of your business.

Following the steps in this guide will help you clean up the Opening Balance Equity account and ensure your QuickBooks Online records are accurate and organized. For more QuickBooks tips and best practices, explore additional resources and guides.