Opening Balances

[danh123]

When starting with an opening balance on an account from one year to the next, the opening balance goes under an equity account correct? So lets say that balance in checking acct is $5000. I start account over again at $5000. Start an opening balance acct for $5000. I noticed though, that when I add to the acct as the new year goes on, say it goes from $5,000 to $7,000, it shows my equity as only $2,000. Is this the proper way to do this? I feel like the equity should be $7,000 since it is all money in my checking account.

Thanks,
Dan

 

[danh123]

Let me rephrase myself. I entered $5000 as starting balance of checking on 1/1/11. It is an account I have had for a long time but $5000 was balance on 1/1/11. Now my account is up to $7500 but the software is still saying I have $5000 equity. Shouldn't my equity be $7500?

Am I doing something wrong? Any help would be greatly appreciated.

Thank you,
Dan

 

[mackwaa]

Let me rephrase myself. I entered $5000 as starting balance of checking on 1/1/11. It is an account I have had for a long time but $5000 was balance on 1/1/11. Now my account is up to $7500 but the software is still saying I have $5000 equity. Shouldn't my equity be $7500?

Am I doing something wrong? Any help would be greatly appreciated.

Thank you,
Dan

Hi Dan

I did read your original post and the reason I didn't respond was because more information is required.

Few questions I'd ask is:

a) You must have done something for the bank balance to increase from $5000 to $7500. What was it? (ie did you complete a job and recieved $2500?)

b) I'm guessing you are actually describing some piece of accounting software you have installed which has automatically increased your equity from $5000 to $7500 without your knowledge?

c) Can you confirm that you started a business with $5000? How much are the shares in this business worth?

Equity, in simplistic terms, is the value of ownership in a business (Equity (finance) - Wikipedia, the free encyclopedia). So since your bank account has increased by $2500 so too did the value or Equity of the business.

I hope this makes sense...

 

[danh123]

Thanks for responding. I think I described things incorrectly in the first post. This is for my personal account. My personal checking account was $5,000 at start of year so that was opening balance and listed as equity. The balance has gone up over the year but it is still showing my equity as only $5,000.

Hi Dan

I did read your original post and the reason I didn't respond was because more information is required.

Few questions I'd ask is:

a) You must have done something for the bank balance to increase from $5000 to $7500. What was it? (ie did you complete a job and recieved $2500?)

b) I'm guessing you are actually describing some piece of accounting software you have installed which has automatically increased your equity from $5000 to $7500 without your knowledge?

c) Can you confirm that you started a business with $5000? How much are the shares in this business worth?

I hope this makes sense...

 

[mackwaa]

Thanks for responding. I think I described things incorrectly in the first post. This is for my personal account. My personal checking account was $5,000 at start of year so that was opening balance and listed as equity. The balance has gone up over the year but it is still showing my equity as only $5,000.

Opening Equity will only change once the year is complete (and the books have been "rolled over"/"balanced forward").

Since the year hasn't finished yet, your Opening Equity is still £5000.

Admittedly, if you closed your books today and produced periodic financials, your Equity would be:

Opening Equity
+/- movements during the year
= Closing Equity