Setting up Bank Accounts and Opening Balances

Posted by on Jan 13, 2011 in Getting Started in QuickBooks | 21 comments

 

The Opening Balances in QuickBooks relate to the Balance Sheet accounts. If you are starting somewhere in your fiscal year, say after the first quarter, then you will have to input those figures for all the accounts using a General Journal entry.

I will first deal with using the account setup and opening balance features before addressing the journal entry.

Bank Account – Now you may have set this up already in the EasyStep Interview but if you did not have all the statements, or were in a rush and skipped that step, I am going to go over it with you. If you are creating an opening balance for a new fiscal year then you should use the accountant’s Balance Sheet figures. If you do not have this, then grab your bank statement.

All your accounts that were set up either by you or QuickBooks will have a zero balance in them until you enter figures or data into them. So let’s start with the bank account.

Go to your Home page and the module that is next to Vendors to your right is the Company with the Chart of Accounts in it. Clicking on the Chart of Accounts will open the window where you will see the account list.  On it you may see several types of accounts such as Asset, Liabilities, Income or Expense.

If you do not see a bank account you will need to add one. If you did set one up then you may need to edit it if there is no balance in it.

Right click on your mouse will open a window from which you can then select New or Edit, depending on whether you have set up the account. I will lead you through the setup for a new account since the second screen is essentially the same in New, as the first screen in Edit.

Choosing New will open a screen where you need to choose the account type, which will be Bank. The Continue tab will then take you to the Add New Account screen. Working your way down from the top, fill in all the fields except for Tax-Line Mapping and the reminder to order cheques, unless of course you have laser cheques already.

Clicking on the Enter Opening Balance tab will direct you to a page where you will use the figure from your previous bank statement. The start date of your company’s operations will determine which month’s bank statement you will use. If you are setting the bank account up in the middle of the year, then take the last reconciled bank balance.

Don’t forget that this is the ending bank balance from the previous month.

Say OK and then click on Save and Close. You may get a message about online banking services, which I will cover in another article, but for now click on No. This will take you back to a screen on which you will see the newly created bank account along with its balance.

You will not have to create an Accounts Payable or Receivable because QuickBooks will create this for you when you add the first vendor (A/P) and customer (A/R).

Journal Entry for Opening Balances – this method would be used when creating your company file during your fiscal year, say the first quarter.  Make sure that you are working with the prior month’s closing Balance Sheet figures!

Go to your Home page and above it at the very top you will see the menu bar which starts with File on the far left. Scan your eyes to the right until you find Company.

Click on that and it will open a list, and near the bottom of that list you will find Make General Journal Entries. Choosing that will take you to the journal entry page. The date that you enter should be the ending of the previous month, then tab once to the Entry No. and type in Opening Balances.

Make sure the Adjusting Entry box has a check mark in it. Only check this box when making adjusting entries, otherwise leave it unchecked. The next tab will take you to the Account field.

Click on the drop down arrow and select the account that corresponds with the prior month’s Balance Sheet account. If you have not set it up in QuickBooks, then follow the steps I described above to add it your Chart of Accounts.

Instead of clicking on the down arrow button you can start to type the name of the account in the blank field and if you have set the account up already, it will fill in the name for you. Tab to the Debit or Credit field and enter in the amount, then tab to the Memo field. In it type Opening Balances, then tab until you get back to the Account field again.

Repeat these instructions until you have entered all the account balances. Your check on this entry will be if the Totals field balances. If it does not, then QuickBooks will not allow you to Save and Close (post it).

If the journal entry had some complicated accounts and you cannot figure it out, then it’s time to call your QuickBooks Trainer or your ProAdvisor.

Next I will take you through List, Customer and Vendor setup in this QuickBooks training.

Remember that you can follow me on Twitter http://twitter.com/QuikBooksTrainr for tips and updates also.

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21 Responses to “Setting up Bank Accounts and Opening Balances”

  1. Thank you. This info was very useful

    • Larry Johnson says:

      Your welcome. Watch for more as the site expends on the topic.

      • So it’s ok just skip the Opening Balance Equity account? I wasn’t really sure why Quickbooks recommends using it when you could just set up the complete chart of accounts and make a journal entry directly to individual equity accounts.

        • Larry Johnson says:

          John, the Opening Bal Equity account is used to balance the entries. I have seen many books over my years where there is a balance in that OPE, that sits there forever. At some point it needs to be cleaned up, because in reality, it most likely is an adjustment of some sort.

          • Larry,
            I have a problem that I can’t seem to get my pea brain wrapped around. Whether I enter checks “written” in “Make General Journal Entries” or the “Check Register”, they debit from my balance (ok so far) but then immediately “re-credits” the amount of the check to my bank account, making my running-total “Balance” wrong.
            Can you point me in the right direction?

            .

          • Larry Johnson says:

            Hugh, this would be a tough call, since I can’t see what you are doing. Questions: What version of QB’s are you running? Why use the Make General Journal Entries for a check? Why not the Write Cheques icon on your Home page? If you use the Check Register, are you putting the amount in the PAYMENT column?

  2. Well that was simple, straightforward and to the point – took a full 2 minutes to get the answer and action – pity I have just wasted an hour trying to get the answer through QB help!!!

    I WILL be back!

    Many Thanks,
    Gail

  3. Tim Prince says:

    If you’re entering previous months bank statement balance….how do you account for the outstanding checks/DIT? We are converting to QB for an existing company and have a few issues with history in several accounts.

    • Larry Johnson says:

      Hi Tim, it depends at what stage you are entering in the new figures. Is this at the fiscl year or month end? All figures entered, depending if they are Balance Sheet or Profit & Loss, will have an opposite entry to the Opening Balance Equity.
      It also depends if you are accounting for the Vendor & Customer balances. Let me know if I can help you as we could do this virtually.

  4. How do I change an opening balance on a other asset account? Do I need to do a JE?

    • Larry Johnson says:

      This is way to much of a generic question without seeing your company file, but I will give you guidelines. Depends on the date that the opening balance was recorded. If you have filled your tax return then no. If you have submitted Financial Statements to a banking institution, then no. Otherwise, just edit the transaction and change the account as long as you are not changing it to a liability or equity.

  5. I have taken over my sisters books, and her bank balance is way out, can i do a journal entry and adjust the balance so it matches Dec 31 2012 bank balance? It is driving me crazy to see that there is 62,000 in the bank when in true actuality there is 6450.98 help!!!!

    Thank you

    • Larry Johnson says:

      Hi Shelly. In accounting terms we call this a plug. Yes, you could do it but then you would have to explain this if you ever got audited or to any accountant that peruses your books. $6,450.98 is material in natural and is not like plugging a figure under $!00. This figure might cause your Profit and Loss or Balance Sheet Statements to be overstated. Many scenarios may be causing this from a cheque, deposit, payment, credit, etc.

      Try running a report under Reports/Banking/Reconciliation Discrepancy to see what might be causing this amount to be out. If this does not solve the problem then I would have a QB Certified ProAdvisor look at it. In the meantime, move forward and keep in mind next time you reconcile the bank you will have to make allowances for that figure.

  6. Hi Larry,
    What is the opening balance I should put in bank account QB2012 . Is it ending balance of my bank statement. We are starting fresh from January 1st, 2013.
    Thanks,

    • Larry Johnson says:

      More complicated than that. Mainly because of the uncleared cheques or deposits. But in order not to hold you up, it would be the ending Dec.31 bank balance. You will though have to account for the uncleared bank transactions. Speak to your accountant about that.

  7. I am opening my business checking account this week for my business (I sell real estate). I am also setting up QB. I’d like to have all of my 2013 income and expenses in QB, however, because I was very naughty and mingled my commission checks and my expenses with my personal checking and credit card accounts, I don’t want to even attempt to put those account balances into QB. I just want to start with my fresh bank account and designated credit card. Should I just make life easy for myself and just enter all income and expenses from this point forward in order to correspond with my new bank account and credit card account? Or is it possible to enter the 2013 income and expenses, and not have them correlate with any bank or cc account? I hope this makes sense… as my poor business management of my finances over the last few years does not! ;)

    • Larry Johnson says:

      Hi Jen,
      I would set up a Excel spreadsheet for your previous year and use a tab for Income and one for Expenses. Enter in all the pertinent date and then hand it over to your accountant.
      Next set up a new company file in QB’s. Make sure to set up a credit card account and separate the business from personal transactions. Next, enter in the opening balances for your chart of accounts that pertain to your Balance Sheet from your previous fiscal year. This information will come from your financial statements “Balance Sheet`.
      Then carry on with your current year information in QB’s for your business. You will need help with this from either an accountant who is QuickBooks trained or a QuickBooks Certified ProAdvisor.
      Hope that helps.

  8. Hi, Larry!
    Very useful post!
    I’m starting a new QB file for the 2014 fiscal year. I understand that I should make a general journal entry for the balance sheet accounts as of 12/31/2013. What about the income statement accounts- sales and expenses? Do I leave the balances at $0 since it is the beginning of the fiscal period?
    Also, how do I enter inventory items? And what do you suggest regarding Accounts Payable and Accounts Receivable? How should I enter the unpaid purchase invoices and sales invoices?
    Thank you!

    • Hi Sara, at the end of the fiscal year, the Income Statement accounts get closed by QB’s to Retained Earnings, that’s why you only enter Balance Sheet accounts, for the new Company File.

      See my blog on how to Export/Import Inventory Items. Also see blog on Exporting/Importing Lists, i.e. Customer & Vendor.
      If you have a lot of either, and many Invoices or Bills, then you will have to start with Opening Balances for Customers & Vendors. See blog on that.

      I would then use your old data info for the history, until all old Invoices & Bills are paid.

      Your Payments for Customers & Vendor, for each, will be applied to an overall outstanding balance.

      Enter any new data as you work in the new fiscal year.

      Hope this helps.

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