---
title: "What is opening balance equity?"
description: "Opening Balance Equity explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/opening-balance-equity/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is opening balance equity?

Glossary

Opening balance equity is a default account QuickBooks creates automatically to hold the offsetting entry whenever an opening balance is entered for a bank, credit card or other balance sheet account. It should be reviewed and cleared to zero, not left sitting on the balance sheet.

Updated September 2026

## How opening balance equity works

The account appears the first time a user enters an opening balance directly on a bank or asset account setup screen rather than through a proper journal entry, since QuickBooks needs somewhere to post the other side of that entry. Left unreviewed, it accumulates unexplained balances from every account added over time.

Clearing it means researching what each entry represents, typically an opening trial balance from a prior system, and reclassifying it to the correct equity or retained earnings account with a journal entry. A nonzero opening balance equity account on a current balance sheet is one of the clearest signs a set of books needs a cleanup. Some bookkeepers set a policy to review this account every month during the first few months after a new file is set up, rather than waiting until year end, so problems are caught while the details are still fresh.

## Example

A new QuickBooks Online file shows $18,400 sitting in Opening Balance Equity after the owner entered starting balances for the bank account, a loan and inventory during setup. The bookkeeper traces each entry back to the prior year's closing trial balance, confirms the figures match, and reclasses the full $18,400 to Retained Earnings, bringing the account to zero. A zero balance going forward confirms every opening balance was accounted for correctly and gives the owner confidence the starting point of the new file matches the business's true financial position.

## Opening balance equity in QuickBooks Online vs Xero

Opening balance equity is a QuickBooks-specific account name, created automatically in both QuickBooks Online and QuickBooks Desktop whenever an opening balance is entered on setup. Xero does not use this account; opening balances there are entered through a conversion balances screen that posts directly to a specified equity or retained earnings account instead.

## Related terms

- [Chart of accounts mapping](https://ledgerbpo.com/glossary/chart-of-accounts-mapping/)
- [Retained earnings](https://ledgerbpo.com/glossary/retained-earnings/)
- [Journal Entry](https://ledgerbpo.com/glossary/journal-entry/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles opening balance equity

As part of a bookkeeping cleanup, we trace every balance sitting in opening balance equity back to its source, confirm it against prior statements, and reclassify it correctly so it no longer distorts your balance sheet. This is one of the first things we check when taking over a new client's books.

[Messy books, rebuilt and reconciled](https://ledgerbpo.com/services/bookkeeping-cleanup/)

Next step

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Source: https://ledgerbpo.com/glossary/opening-balance-equity/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt