Bookkeeping Basics · Edmonton
Opening balance equity in QuickBooks: why it should be zero.
Opening balance equity is a holding account QuickBooks creates during setup. Left alone, it hides errors and confuses your accountant. Here's how to clear it properly.
By the Plum team- Updated Oct 2026
- 8 min read
- QuickBooks creates opening balance equity as the other side of every opening balance you enter.
- After setup it should be zero. A balance means your opening balance sheet is incomplete.
- Clear it with one journal entry that matches your last year-end balance sheet.
- Watch for new entries later, usually from adding a bank account or inventory item with a starting balance.
If you set up QuickBooks Online yourself, open your balance sheet and look in the equity section. There's a good chance you'll see a line called opening balance equity in QuickBooks, with a number nobody can explain. It's one of the most common things we fix when we take over a file, and it's a sign the setup was never finished.
This guide explains what the account is, why it should be zero, and walks through a worked example of clearing it with a journal entry. It's written for Canadian businesses, so the opening numbers come from what your accountant filed with CRA.
1What opening balance equity is
Every entry in double-entry bookkeeping needs two sides. When you add a bank account to QuickBooks and type in an opening balance of $12,500, QuickBooks needs somewhere to put the other side. It doesn't know whether that money came from last year's profit, a loan, or you, so it uses a placeholder: Opening Balance Equity.
Common things that post to it:
- A bank, credit card or loan account created with an opening balance
- A fixed asset account, like equipment or a vehicle, created with an opening balance
- Inventory items set up with a starting quantity and value
The placeholder is fine for a day. The problem is when it stays. Your accountant can't file a return with an equity account that means "we don't know". For the theory behind the two sides, see double-entry bookkeeping explained.
2A worked example: clearing opening balance equity in QuickBooks
Say you run an incorporated landscaping company with a December 31 year end. You start using QuickBooks Online on January 1, 2026. Your accountant's financial statements show this balance sheet at December 31, 2025. The figures are hypothetical.
| Account | Dec 31, 2025 |
|---|---|
| Chequing | $12,500 |
| Equipment (net) | $8,000 |
| Total assets | $20,500 |
| Business credit card | $1,800 |
| Equipment loan | $6,000 |
| GST payable | $2,200 |
| Share capital | $100 |
| Retained earnings | $10,400 |
| Total liabilities and equity | $20,500 |
During setup you created four accounts with opening balances dated December 31, 2025: chequing $12,500, equipment $8,000, the credit card $1,800 and the loan $6,000. You never entered GST payable, share capital or retained earnings.
QuickBooks put the other side of each one into opening balance equity:
- Chequing and equipment: $20,500 credited to opening balance equity
- Credit card and loan: $7,800 debited to opening balance equity
- Net: a credit balance of $12,700
That $12,700 is exactly the part of the balance sheet you didn't enter: GST payable of $2,200, share capital of $100 and retained earnings of $10,400. So the fix is one journal entry, dated December 31, 2025:
| Account | Debit | Credit |
|---|---|---|
| Opening balance equity | $12,700 | |
| GST payable (liability) | $2,200 | |
| Share capital (equity) | $100 | |
| Retained earnings (equity) | $10,400 | |
| Totals | $12,700 | $12,700 |
Opening balance equity is now zero, and your QuickBooks balance sheet at December 31, 2025 matches your accountant's. When you file the first GST return of 2026 and pay the $2,200, the payment clears the liability instead of landing in an expense.
For a sole proprietor, the leftover would usually go to owner's capital instead of share capital and retained earnings.
3The cleaner way: one opening journal entry
If you're starting fresh, you can skip most of this. Create your accounts with no opening balances, then post a single journal entry dated the day before your start date that copies the entire trial balance from your accountant's year-end statements. Debits equal credits, nothing touches opening balance equity, and every line matches what was filed. Our guide to the trial balance shows what that list looks like.
4When opening balance equity comes back
You cleared it to zero in January. In June it shows $4,300. That happens more than you'd think, and it's almost always one of these:
- A new account added with a balance. You opened a savings account or a new credit card, added it to QuickBooks, and typed in the balance on the setup screen. QuickBooks posted the other side to opening balance equity.
- A new inventory item with a starting value. Setting up stock you already had creates an entry to opening balance equity for its value.
- A loan or asset entered the quick way. Adding a new vehicle loan with an opening balance, instead of recording the purchase, does the same.
The fix is the same each time. Run a report on the account, find the new entry, and decide what the other side really is. A new savings account funded from chequing is a transfer. A vehicle loan belongs with the vehicle purchase. Stock you already owned before you started tracking it is a question for your accountant. Then post a journal entry to move it, and opening balance equity is back to zero.
The habit to build: when you add any new account in QuickBooks, leave the opening balance blank and record how the money actually got there.
5Common opening balance mistakes
- Using the wrong date. Opening balances should be dated the day before your first transaction in QuickBooks, usually the last day of the prior fiscal year.
- Using today's bank balance. The opening balance must match the bank statement on the start date, or the first reconciliation will never work.
- Importing old transactions on top. If the bank feed pulls in transactions from before the start date and you accept them, income and expenses are counted twice.
- Forgetting liabilities. GST payable, payroll remittances owing and the shareholder loan are the ones most often missed.
- Leaving it for the accountant. At year-end they'll book an adjustment, but your monthly reports were wrong all year, and they'll likely bill for the time.
- Moving it all to retained earnings without checking. That makes the balance sheet "look" fine while hiding a real error, such as an unrecorded loan.
6Finding and fixing it in QuickBooks Online
- Open your Chart of accounts and find Opening Balance Equity. Use the run report or view register option to see every transaction behind the balance.
- Pull your accountant's last year-end financial statements, or the balance sheet information from the last T2 for a corporation.
- Run a QuickBooks Balance Sheet as of the same date and compare line by line.
- Fix any opening balances that are wrong at the source, rather than layering corrections on top.
- Post one journal entry (+ New, then Journal entry) moving the remaining balance to the missing accounts.
- Re-run the balance sheet. Opening balance equity should show $0.00 and every line should match.
- Set a closing date under Settings, Account and settings, Advanced, so the opening period can't be changed by accident.
7Why this matters for CRA
Your opening balances aren't a guess. For a corporation, they're the closing numbers on the balance sheet your accountant reported with the last T2. For GST, the opening GST payable is the amount on your last return that hadn't been paid yet. If your QuickBooks file starts somewhere else, every report after it is off by the same amount, and your accountant has to rebuild the bridge every year.
CRA expects records to be kept for six years from the end of the tax year they relate to, so keep the year-end statements you used to set up your opening balances with your other records.
8Opening balance checklist
If your QuickBooks file was set up in a hurry and opening balance equity won't go away, Plum fixes this regularly as part of switching bookkeepers or a catch-up. We help owners in Edmonton, Sherwood Park, Fort Saskatchewan and St. Albert. Book a call and we'll check yours.
9Questions people ask
What is opening balance equity in QuickBooks?
It's a temporary equity account QuickBooks uses as the other side of the entry whenever you enter an opening balance on an account. It keeps the books balanced during setup, but it's meant to be cleared to the real equity and liability accounts afterwards.
Should opening balance equity be zero?
Yes, once your opening balances are complete. A remaining balance usually means part of the opening balance sheet is missing or wrong, such as GST payable, retained earnings or a loan.
How do I clear opening balance equity in QuickBooks Online?
Compare your QuickBooks opening balances to the last year-end balance sheet from your accountant, enter anything missing, then post a journal entry that moves the remaining balance to retained earnings, owner's capital or other correct accounts.
Can I delete the opening balance equity account?
QuickBooks creates and uses it automatically, so it isn't something you remove. The goal is a zero balance, not a missing account.
Why did opening balance equity change after setup?
Something posted to it later: often a new bank or credit card account added with an opening balance, or an inventory item created with a starting value. Run a report on the account to find the transaction.
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Book a free 15-min callThis article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.