How to Set up Your Initial Balance Sheet in QuickBooks
To set up your initial balance sheet in QuickBooks, you previously would have set up your organization as a new company in QuickBooks – with its peculiar chart of accounts (COA). The COA includes balance sheet accounts that are prerequisites for setting up the initial balance sheet.
Your organization’s initial balance sheet shows your business’ financial status on the first day of operations; for this reason, it is also termed the opening day balance sheet. This balance sheet shows the values of your business’ assets, liabilities and owner equity on your organization’s first business day. To set up your initial balance sheet in QuickBooks, you may utilize the procedures itemized below.
Decide on the date of the initial balance sheet, since balance sheets document balances as of particular dates. The date of your initial balance sheet should preferably be your organization’s first business day. Otherwise, it may be another significant day in the organization’s early history.
Classify all your organization’s assets and liabilities. Assets include property, plant, equipment, inventories and start-up capital. Liabilities include loans, trade accounts payable, salaries, wages and statutory contributions.
Record the values of all the assets and liabilities. Receipts and bank statements substantiate costs of assets. Payroll reports, loan statements, suppliers’ invoices and sales records substantiate values of liabilities.
To determine your organization’s initial owner equity, subtract initial total liabilities from initial total assets. This difference, also known as your organization’s net worth, is the investment you and any other owners make in the organization. Using your documents that show these computations, enter into QuickBooks the values of your organization’s assets and liabilities on the first business day.
Your organization’s total assets, liabilities and owner equity should equal the same values resulting from your computations. Additionally, the initial balance sheet must balance according to the basic accounting equation’s statement that assets plus liabilities equal owner equity.
In your company’s COA, QuickBooks provides fields for opening balances for the balance sheet accounts. If your company is new and did not operate prior to the selected starting date, each beginning balance will be zero on that date.
If you plan to enter opening balances for balance sheet accounts that had no activity after operations started,
- open your organization’s QuickBooks account,
- select “Lists” and
- click “Chart of Accounts”.
Choose each account that has a beginning balance. Select “Edit” and, from the drop-down items, click “Edit account”. Enter each “Opening Balance” and the respective “as of” date. Click “OK”.
If no values were assigned to “Opening Balance” when the accounts were created, the subsequent entry of those values will be affected by any activity on the particular account after the starting date of the business. After you enter the starting date, QuickBooks prohibits changes to it but accommodates adjustments to the beginning balances as of that date.
Like most tasks in QuickBooks, setting up the initial balance sheet confirms the reputed user-friendliness of QuickBooks’ accounting packages.