and now we're finally going to explain what is  opening balanced equity opening balanced equity  

is an account that's only used by the computer  it's not an account that you will see mentioned  

in a college accounting textbook it is simply  the difference between the debit balances and  

credit balances in the general ledger of a  company who's starting to use QuickBooks it  

should be the same as the total owners equity of  the company before QuickBooks after inputting all  

of the other account balances opening balance  equity should be adjusted with journal entries  

to distribute the owner's equity to the owners  capital account for example let's imagine that  

this is a trial balance of a company that is just  beginning to use QuickBooks notice there are only  

five account balances with five accounts and  the chart of accounts listed here and we did  

not include any of the owner's equity accounts  that's because as you start setting up the file  

QuickBooks will create the opening balance equity  account as you put in the beginning balances well  

how much should the opening balance equity be  after we put in the beginning balances well it's  

very simple the opening balance equity should  be the difference between the debits and the  

credits whatever that difference is that how much  opening balance equity should be and that's what  

QuickBooks will put as you put in the beginning  balances QuickBooks adds value to opening balance  

equity when you input beginning balances one by  one so as we put in these balances one by one  

opening balance equity will get bigger and bigger  and when we're finished putting in the other five  

opening balances that means that opening balance  equity will finish at exactly twenty thousand  

now this is the chart of accounts that I have  created for this example company notice the  

accounts listed in capital letters are the five  accounts that we had in our in our example that  

I showed a minute ago one two three four five and  the other accounts and lowercase are the accounts  

that QuickBooks automatically put in the chart  of accounts for industry type I chose other none  

but when it came to the company type I chose  partnership so that you can see how we would  

distribute the opening balance equity after we put  in the beginning balances it's very simple to put  

in the beginning balance choose the account  click edit account and down here click enter  

opening balance now I happen to remember that  the cash and bank opening balance is $10,000  

and statement ending date I think that's the date  that you're actually beginning to use QuickBooks  

so let's imagine it's June 1 now after I click OK  and click Save and close you can see the computer  

put $10,000 in the bank account as I mentioned  but it also made the balance of opening balance  

equity 10,000 and you can confirm this by opening  up to trial balance let's put in supplies account  

and an account enter opening balance I believe  supplies were two thousand dollars so we'll put  

here two thousand for supplies as of June 1 the  date were switching over to QuickBooks can you  

guess what the balance of opening balance equity  will be after we save this that's right twelve  

thousand because we put ten thousand and cash  and two thousand and supplies and again the trial  

balance confirms all the numbers what's the third  number equipment 28,000 click on equipment account  

edit opening balance 28 thousand a heads of June 1  click OK save and close now opening balance equity  

has 40,000 wow it looks like it's getting bigger  however there are 2 liabilities that we have to  

put let's put for accounts payable edit opening  balance I believe it was 5,000 yes it was 5,000  

as of the date we switch to QuickBooks which  in this case is June 1 notice opening balance  

equity decreased because we added the balance  of a liability now what we have to do is add  

the bank loan for 15,000 bank loan edit opening  balance 15,000 as of the conversion date which  

is June 1 and now the opening balance equity is  exactly as what we expected it to be 20,000 and  

again we can confirm that by opening up the trial  balance now we will do the last step in the setup  

by distributing the opening balance equity  to the partners and we'll do this by making  

a journal entry should be very simple because  opening balance equity is a very round number  

so we click company make journal entry and the  date of the journal entry should be the date of  

the conversion which in this example is June 1  now we're going to debit opening balance equity  

for half the amount and we're going to credit  the first partner's capital partner 1 equity ok  

now save and new and do the same thing we  again debit opening balance equity and we  

credit partner twos equity and save and close  now you can see from the trial balance opening  

balance equity is zero because the equity has been  distributed to the individual partners accounts