How to Enter Opening Balances via a Journal Entry in QBO

Hello, everyone. Today we're going to talk about how to enter opening balances into QuickBooks Online. So first, why do you want to enter opening balances into your accounting software? And the reason for this is that any accounting system tracks all of your transactions since the beginning of time. This is an essential part of any accounting system and this is what allows the debits and the credits to balance and to see your history since the beginning. Additionally, you have accounts such as the retained earnings account, which reflects your profit losses since the inception of your business. So there are a variety of reasons that you would want to enter your opening balances. And it is an absolutely necessary step if you have an existing business that you are moving over to QuickBooks Online.

So the first step that you want to do with respect to this process of entering your opening balances is to ensure that you get minimally a balance sheet from your previous accounting software. Or if you're tracking it in Excel, you would want a balance sheet from there.

Generally speaking, if you do have an accounting software that you used previously, you you should be able to export your balance sheet into an Excel format or a CSV format that you can convert to a spreadsheet, either Excel or Google Sheets. Once you do that, then you're ready to start entering your opening balances. Alternatively, if all you have is a PDF or a set of financial statements with the balance sheets included as part of the financial statements, you can use that as well. And we will walk through the process of entering the journal entry. It's fairly straightforward. There are only a couple of things that are worth noting. In this case, we will be taking a look at accounts receivable and accounts payable. We will not be looking at inventory, but a note about inventory. If you do have it, you would want to reflect each balance for each item that you have in inventory. And that will be the subject of another tutorial. There's also various resources online, so you can absolutely look at that just to see how inventory will work in terms of the importance. Okay, so let's go ahead and see how we are going to approach the import of these balances. So I have here a balance sheet that I have exported from the previous accounting software. In this case it is in fact QuickBooks. But again, almost all accounting software will allow you to do this export into a spreadsheet. So you'll see here the accounts are listed and we want to make sure that each account here with a balance in it has a corresponding account in QuickBooks Online. So there are two ways of doing this you can go to your QuickBooks Online file, you can go to transactions in the chart of accounts. And here you can match each account from your balance sheet and see if it's here. If it isn't here, then you would want to set it up by going to new.

And ensuring that you choose the correct account type, the correct detail type and the correct name. The second way to do it, which is how I will be showing you how to do it, is directly within the journal entry. So let's go and set up this journal entry. For the opening balances.

We click on the new button and we select Journal entry, which is located under other.

And this will bring up this new tab which is the format of the journal entry in QuickBooks Online. And you'll notice that a journal entry are going to look at account debits, credits, a description and a name where relevant.

So in terms of the journal date, we are going with January 1, 2021.

I know it's a little old, but it is the date of my balance sheet. So let's click on January 1, 2021. You can assign a number here or you can put a short description. So I am going to type in opening balances.

And that way it's very clear when you look at this journal entry that it is for the opening balances. You can expand on this in the description.

Now what we want to do is to enter each of the balances for each of these account categories. And where the accounts are not reflected in the current Sherlock Holmes file, we will add them directly from this interface. So let's do that. I like to split my screen on this one, so.

That way it makes the entry much easier. So the first thing that has a balance is bank. So I'm going to choose bank from the drop down. I do have bank and here I am simply going to right click copy and.

Then I press on Control V, take out the equal sign. Alternatively, I can just right click and paste. So that's my first balance. This is a debit. So let's talk a little bit about the debits and credits on the balance sheet. Everything that is under assets is a debit, except for accumulated depreciation, which is a minus on the asset section. This means it's actually a credit. It is known as a contra account and for presentation purposes it is presented as a deduction from the computer equipment because it is depreciation. We do have a video on depreciation. You can take a look at that to get more details on how depreciation works. Everything under liabilities and equity is going to be a credit unless there is a negative here. There are no negatives here. So everything here will be a negative. You'll notice the total assets.

Is equal to the total liabilities and equity. This is essential. A journal entry must balance, which means the debits must equal the credits. We know by looking at our balance sheet that this is the case. So let's continue. We have an account called Investments. So let us just type in Investments and it comes up, which is great. So it's already there. So I can enter 82,000 or I can simply copy and paste it. Now, the next item on the balance sheet is accounts receivable, which is amounts that your customers owe you at January 1, 2021. So in this case, we cannot simply enter accounts receivable of 5,500. Instead, what we have to do is break this down into the customers that owe us $5,500. It may just be one customer or it could be several customers. In our case, there are three customers totaling $5,500 which compose this amount on the balance sheet. And in the journal entry, we have to show those three customers because we are going to put the name of the customer. And this allows us to see the accounts receivable aging summary exactly in the same way as this report broken down by the customer. This is a very important report to have because you want to know how much your customers owe you. And. And whenever you're entering accounts receivable in QuickBooks Online, you do have to assign a customer to the accounts receivable account. So let's go ahead and do that. I'm going to select accounts Receivable, and we have our first customer that owes us $1,350. We're going to see if they're here. Adversary company. It is a customer. Great. We'll do the next two.

And it is Hooper Inc. And the third one, which is 2150, and it belongs to Moriarty. If the name is in here, you can actually add it directly from here by clicking on Add New and simply entering the name. So now we will be able to replicate the total at least on the report. You won't actually have the aging, but you'll at least know the total owed to you by each customer.

So let's go back to our balance sheet.

Now we're going to find computer equipment.

We have computer as a fixed asset. We know this is the same.

Because this is on the balance sheet. It is actually a fixed asset as well. It is not an expense. Let's put in that 938.80. I entered computer equipment first simply because accumulated depreciation should be reflected under computer equipment. This is just an accounting nerd thing. So let's see if we have accumulated depreciation. We do not. So let's add that here now. So I'm going to type this in. I could also have copied and pasted it to save time. The account type is property, plant and equipment. And the detail type is Accumulated Depreciation. Amortization is fine, too, but this is a little more specific. The name of the account is Accumulated Depreciation. Nothing else really has to be entered at this juncture. You can save and close it. And the account appears here. If you remember I mentioned this is a negative asset. You'll see that here. So it would actually be a credit. We're going to enter that.

And then we are going to go to our liabilities section. Now, you'll see here, Accounts Payable works exactly the same way as accounts receivable in reverse. This is the amount that you owe to your suppliers. And you do have to reflect each supplier for the same reasons. You want to be able to see the breakdown in a report. And QuickBooks requires that you assign a name to any accounts payable that you enter. So let's select accounts payable from the list. It is a credit. Because we are now in the liabilities section, we'll enter 1600. We can find Hudson Enterprises. We'll go through this quickly.

Next one is Irregulars. And the final one is.

$50 for QuickBooks, which is what they charge Sherlock Oak's Detective Agency. Okay, so we're making some good progress. We're almost done and we only have a few more accounts. So the next account is the GST QST payable. So we are going to select that from here.

And because it's a liability, we will enter the amount as a credit.

Similarly, income tax payable is the amount that we owe for income taxes. This is also not here. So let's set this up. Up. I'm going to type this in. Income tax payable is a current liability. And you can choose current tax liability as a detailed type. And the name is Income Tax Payable. Nothing else needs to be entered.

And we are going to enter $1291.

Now, Sherlock Holmes, who is the shareholder of the Sherlock Holmes Detective Agency, has loaned the company $49,000 over the years and he has not withdrawn this amount. This means he can withdraw this amount anytime. I do have a video on This a very popular video on shareholder loans. So I encourage you to look at that if you want to know how they work and how to enter them. So let's select shareholder loan. It is there in the drop down and we are going to enter the amount.

Now we are moving on to the equity section. Equity is also a credit. It is included with liabilities to form total liabilities and equity which as mentioned agrees to the total assets. So let's type in capital.

Stock. It is also not here. So let's add this. This will go under the equity section and common stock, it's one of the names. There's very capital shares, share capital, common stock. It could be any one of those things. And again really nothing else needs to be entered here. You can save and close it. So it's super simple to enter an account directly from here.

I apologize for the noise outside. That was a snow truck going by as there is lots of snow in Montreal right now. So anyway, so we have just entered the capital stock. You'll notice that QuickBooks Q keeps sort of auto generating an amount here. And this is to make sure that the journal entry balances. But this is. You should really only be using this on the last line and it should agree to the last amount.

On the balance sheet. So the capital stock is $20.

The next line that has a balance is the retained earnings. So let's type in retained earnings. It is here. This is an auto generated account in any software and it is the accumulation of all of the profit less all of the losses since the beginning of time. So we'll see here that the retained earnings is 128, 358.

The last line is profit for the year. And this represents the profit for 2020, the previous year. And because we are not entering the expenses and the sales for 2020, we are just simply going to enter the profit for the year. This gets added to the retained earnings and therefore we can show it as. We don't have to add it up here. We can just simply show it as a separate line item called retained earnings. And you'll see the QuickBooks generated amount automatically agrees to this. So we know that our journal entry is in balance.

Now here in terms of the description, typically journal entries always start with two. So you can type in to reflect opening balances.

January 1, 2021. And we can copy this on all of the line items so that when it shows up in the reports we know exactly what it relates to and there's no ambiguity.

So that's done. We have the Names where necessary. We could enter other names if we want, but really the names are important for the accounts receivable and for the accounts payable. As we scroll over, if you can enter sales tax from here. This is not applicable in this case, but that will come up in a future lesson when we talk about journal entries. If you're set up for location and classes, you can also enter that here. Again, in this case, it's not applicable. This last line is a little trash can and if you made a mistake you can actually just click click on the trash can and it will delete the line item and then you can re enter the amount. So that's really it for the journal entry. The memo is already here. You don't necessarily have to enter anything. And there is another section for attachments. And what is very useful to do in this case is to attach your balance sheet that you just entered so you can review it. Or if you have an accountant, they can review it it quite easily. You don't have to go digging through your files to find it.

And we click on open.

And it is attached.

And that's pretty much it. So you click on save and close. If your journal entry was out of balance, it wouldn't let you save and close this. It would ask you to review it and then you would have to make sure that the debits match the credits. So let's save and close this.

And now what we're going to do is we're going to go to reports.

And we are going to go to the balance sheet at January 1st to see the entry of the opening balances. So let's do that.

Let US click on January 1, 2021 and to January 1, 2021, because that's the only date that we want to see. Let's run report and you'll see here that the totals match the balance sheet. We have 1-932-2979 and we have 193-22-979 and all of these balances match. You can also go to your reports, look at your Accounts Receivable Aging summary. You'll see as of.

January 1, 2021, it matches the 5,500. And similarly you can go to your Accounts Payable report, which is way down for some reason. Click on the Accounts Payable Aging summary, change the date run report and you'll see the 4200 agrees to this amount here.

That concludes our tutorial on adding opening balances to your QuickBooks Online file from another accounting software, potentially a spreadsheet and you can also use a trial balance. And the only difference with a trial balance is that the format is slightly different. It shows the debits in one column, the credits in one column, and it is all just one report rather than separating them into assets and liabilities. So it's actually much easier to do with a trial of you know exactly what your debits and credits are. The principles are the same.

So that's it. I hope this was useful. Please like subscribe. Let me know if you have any comments or if you would like to see tutorials on any other aspects of QuickBooks Online. And I will try and make a video. Have a great day.