The 'Open Balance Equity' account is a special clearing account used for setting up a new company file and should have zero balance. If you have inventory adjustments posted to this account, these adjustments need to be moved to the correct account.
The usual cause of inventory adjustments posting to this account is when new items are created with an on hand quantity and total value (as shown in the below example). There is no transaction to account for the inventory and QuickBooks posts to the 'Open Balance Equity' as a result. Entering on hand quantities during the initial creation of products in QuickBooks is considered bad practice.
If an item is created in AdvancePro and stock is added (via initial stock/adjustment or VPO) before the item exports to QuickBooks, the identical scenario occurs. QuickBooks creates the item with an initial on hand quantity and the total value is posted to the 'Open Balance Equity' account. Any inventory adjustment posted to this account should be moved to the appropriate adjustment account.
To prevent the problem from occurring, perform the following steps when entering a new product in AdvancePro:
- Create the new product in AdvancePro with 0 stock.
- Perform an export to QuickBooks before entering any adjustments or transactions for the new product.
- Verify that the product has been created successfully in QuickBooks and then proceed as normal.