Accounting for Equity

Most of the changes to your equity accounts happen in the backgroundautomatically and without intervention from you. The Opening Balance Equity Account (OBEA), for example, is adjusted when you make entries that affect the opening balances of other accounts. For example, if you set up a new account to reflect your company's ownership of a $2,000 computer, the transaction is recorded like this:

	Debit	Credit
Fixed Asset/Computer	$2,000.00
OBEA		$2,000.00

The amount in the OBEA actually should be categorized with the company's net worth, so you might have to make a journal entry to reclassify this amount:

	Debit	Credit
OBEA	$2,000.00
Retained Earnings		$2,000.00

At year-end, QuickBooks automatically resets your income and expense accounts to zero balances for the new year. The net effect of this transaction is offset in the company's Retained Earnings account.

If an investor or owner puts money in the companynot as a loan but as a capital investmenta transaction like this might be recorded:

Debit	Credit
Cash	$10,000.00
Owner's Equity		$10,000.00