Question

Your client calls you to figure out why he suddenly has an amount showing in his balance sheet for Opening Balance Equity. Which of the following errors could he have made that would result in a balance existing in the Opening Balance Equity account?

Answer 1

Opening Equity balance is a result of offsetting accounting balances in the Balance sheet, whenever a new account is created, the balances that a user posts into the account is posted in the account and is balanced out by simultaneously being posted in opening equity account. It happens to create a balance in the Balance Sheet, And later the amount is moved to the other respective account balances.

The users enter an opening balance, when setting up a new account, vendor, customer or inventory item.