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What do I do with open balance equity?

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Bringing an Opening Balance Equity Account to Zero

Make your balance sheet look more professional and clean by clearing the balance in this account.

You or your bookkeeper can make journal entries to close this account off in various ways. Here's the most common method:

  • If your company is a corporation: Close out the balance equity to "Retained Earnings".
  • If your company is a sole-proprietorship: Close out the balance equity to "Owner's Equity".

If it's a positive balance, put a debit entry to the opening balance equity account and a credit to the owner’s equity account (or retained earnings account.)

If it's a negative balance, put a credit entry to the opening balance equity account and a debit to the owner’s equity account (or retained earnings account.)

Keep in mind that closing the balance equity to retained earnings or to owner’s equity is essentially the same concept. These equity accounts are just labeled differently to represent the ownership or form of a business.

What do I do with open balance equity?

Bringing an Opening Balance Equity Account to Zero

Make your balance sheet look more professional and clean by clearing the balance in this account.

You or your bookkeeper can make journal entries to close this account off in various ways. Here's the most common method:

  • If your company is a corporation: Close out the balance equity to "Retained Earnings".
  • If your company is a sole-proprietorship: Close out the balance equity to "Owner's Equity".

If it's a positive balance, put a debit entry to the opening balance equity account and a credit to the owner’s equity account (or retained earnings account.)

If it's a negative balance, put a credit entry to the opening balance equity account and a debit to the owner’s equity account (or retained earnings account.)

Keep in mind that closing the balance equity to retained earnings or to owner’s equity is essentially the same concept. These equity accounts are just labeled differently to represent the ownership or form of a business.