[GNC] Equity Accounts - Opening Balance or no?

Michael or Penny Novack stepbystepfarm at comcast.net
Wed May 12 10:26:45 EDT 2021

On 5/11/2021 3:39 PM, Troy Spindler wrote:
> Hey all.
> Does anyone know what's the difference between an Equity account with vs.
> without having "Opening balance" checked off? From what I can tell, they do
> the same thing.
> I have a new business with its own Gnu Cash file, and I'm trying to record
> my transfers from my personal accounts as equity rather than income. It
> seems right to use an "Opening balance" account to record my initial
> investments I made in the company, but should I treat all future transfers
> from personal the same way? If so, what would a Equity account that isn't
> an Opening balance account be used for?
> Thank you,
> Troy

Sad but true, using an application like gnucash to partially automate 
the processes of bookkeeping do not mean you don't have to take the time 
to learn the fundamentals of double entry bookkeeping.

a) "Opening balance" is a shortcut you ca use when beginning a set of 
books instead of using an explicit opening transaction or transactions 
(using two means not having to enter a transaction split on BOTH the 
debit and credit side)

b) Yes, in the future, putting money into your business or taking money 
out would be transactions where the other side is an equity account. 
Keep in  mind, in the general case the business might not have a sole 
owner  (so partner shares need to be tracked, further investments and 

c) With gnucash, you don't have to explicitly "close the books" (close 
the temporary equity accounts of type "income" and "expense" to equity). 
Gnucash can produce the P&L report without that. But in this report, you 
do get to see a virtual (equity) account for  net gain or loss. This is 
the amount that would have been transferred to equity (an equity 
account) had you done a "close the books". That amount will also show up 
when you run a Balance Sheet report as a (virtual) equity account 
"retained gains" (or losses).

d) If you do use "opening balance" when opening the books, that account 
is usually never changed. Especially if, as is likely, you will both be 
putting money in and taking money out, and you want to see "owner's 
equity" in one place, that is an argument for not using the "opening 
balance tool". Thus, personally, I would create the (new) set of books 
with all accounts 0 (in other words, no opening balance) and under 
equity I would put an account with a name like "owner's equity". I would 
then, using your balance sheet from before gnucash to enter two 
transactions, spits, one for all the asset accounts (credit side 
"owner's equity) and one for all the liability accounts (debit side 
"owner's equity) with description "opening the books" dated as of the 
date the books are being opened for. Then, when in the future, you are 
making additional investments in the business or taking money out, your 
net equity will always be available at a glance.

Michael D Novack

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