Glossary · Bookkeeping basics
Opening balance equity (OBE)
Opening balance equity is a temporary equity account that accounting software uses to balance the opening balances entered when books are set up. Each opening bank balance, receivable or loan needs a second side, and this account takes it. Once setup is finished, an accountant moves what is left to owner's equity or retained earnings.
Glossary / Opening balance equity
How it works
When you start new books partway through a business's life, you enter what it has and owes on the start date: bank balances, open invoices, unpaid bills, loans, inventory. Double entry needs an offset for each of these, and the software posts it to opening balance equity.
If every opening balance was entered, the account's total equals the business's equity on the start date. A balance that stays in opening balance equity for years is a sign setup was never finished. Accountants usually clear it with a journal entry once the opening trial balance has been checked.
Worked example: Setting up books on January 1
A business moves to new software on January 1. It enters a bank balance of $15,000, open invoices of $7,000 and a loan of $9,000.
Opening balance equity ends up with a credit of $15,000 + $7,000 - $9,000 = $13,000. The accountant compares that with the equity on last year's balance sheet, then moves it into owner's equity or retained earnings.
| Opening balance | Debit | Credit |
|---|---|---|
| Bank | $15,000 | |
| Accounts receivable | $7,000 | |
| Loan payable | $9,000 | |
| Opening balance equity | $13,000 |
In AcboBooks
Opening Balance Equity (3000) is in the starter chart. Opening balances on balance-sheet accounts, opening inventory, and open invoices and bills entered at setup or brought in from a QuickBooks import are offset to it, so open invoices still age, get paid and appear on statements.
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Updated October 25, 2026. General information, not tax, legal or accounting advice. Rules and rates change; check with the IRS, the CRA, your state or province, or your accountant.
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