Skip to main content
Accounting Guide

Opening Balance Entries

How to properly initialize your books with existing bank balances

What is an Opening Balance Entry?

An opening balance entry is a journal entry that records the starting balance of an account when you begin bookkeeping. It's needed when your bank account already has money in it, but your General Ledger (your books) shows $0.00 because you're just starting to track your finances.

Common Scenario:

  • • You start a business with $10,000 in your checking account
  • • You begin using DynaTax 3 months later
  • • Your bank shows $8,500, but your books show $0
  • • You need an opening balance entry to sync them up

How the Journal Entry Works

Opening balance entries follow standard double-entry bookkeeping principles:

Example Journal Entry:

Debit: Cash - Business Checking
Asset Account (increases)
$8,500.00
Credit: Opening Balance Equity
Equity Account (increases)
$8,500.00
Totals:$8,500 = $8,500 ✓

Debits must equal credits (balanced entry)

Why "Opening Balance Equity"?

This is a temporary equity account used by QuickBooks, Xero, and other accounting software. It represents the initial financial position when starting bookkeeping. During financial statement preparation, your accountant will reclassify this to Owner's Equity or Retained Earnings.

How to Create an Opening Balance Entry in DynaTax

1

Go to Bank Reconciliation

Navigate to Financial Dashboard → Bank Reconciliation

2

Select Your Bank Account

Choose the account that needs an opening balance from the dropdown menu

3

See the Warning Banner

If your GL shows $0 but your bank has a balance, you'll see an orange warning banner:

⚠️ Opening Balance Required

Your GL shows $0 but your bank has $X,XXX...

4

Review the Entry

Click "Create Opening Balance Entry" to see a preview of the journal entry that will be created, including debit/credit amounts

5

Create the Entry

Click "Create Entry" and DynaTax will automatically:

  • • Create the GL accounts if they don't exist
  • • Post the journal entry
  • • Update your beginning balance
  • • Enable proper reconciliation

Frequently Asked Questions

Q: What if I have multiple bank accounts?

A: You'll need to create a separate opening balance entry for each account that has a balance but shows $0 in your GL. DynaTax will detect this for each account individually.

Q: Can I edit or delete an opening balance entry?

A: No, once posted, journal entries cannot be edited to maintain audit trail integrity. If you made a mistake, you'll need to create a correcting entry. Contact your accountant or bookkeeper for guidance.

Q: What date should I use for the opening balance?

A: DynaTax automatically uses the start of your reconciliation period. This is typically the date you began tracking your finances in DynaTax.

Q: What happens to "Opening Balance Equity"?

A: This is a temporary holding account. During year-end closing or financial statement preparation, your CPA or bookkeeper will reclassify this balance to Owner's Equity, Retained Earnings, or the appropriate equity account for your business structure.

Q: Do I need opening balances for other accounts (credit cards, loans)?

A: Yes! The same principle applies to credit cards (liability accounts) and loans. If you start tracking with an existing balance, you'll need an opening balance entry. The journal entry will be:

  • • Credit Cards: Debit Opening Balance Equity / Credit Credit Card Liability
  • • Loans: Debit Opening Balance Equity / Credit Loan Payable

Need Additional Help?

Opening balance entries can be confusing if you're new to bookkeeping. We're here to help!