What is Opening Balance Equity?

Opening Balance Equity is a holding account for starting balances. Say your books begin on January 1 and your checking account already holds $5,000 that day. That $5,000 is booked as the account's opening balance, and since every entry has two sides, the other side goes to Opening Balance Equity, under equity on the balance sheet.

A balance there is normal while the books are being set up. Once they are, your CPA usually moves it into owner's equity or retained earnings with one journal entry, depending on how the business is set up. If it keeps changing after setup, openings were probably entered more than once, or used to force an account to match the bank.

In Switchbooks, Switch books each account's opening from the statement balance the day before its first transaction, against Opening Balance Equity or another equity account you name. If an opening counts money the account's earlier transactions already hold, he can remove it.