Question

You are reviewing the Client Overview tab for a new client to determine the scope of a bookkeeping clean-up engagement. You notice that there is a large amount in the Opening Balance Equity account. Which 3 reasons could be causing this balance?

Answer 1

Answer:

See explanation section

Explanation:

Three reasons could be causing the opening equity balance high, and those are -

1. Issuing more common stock is one of the significant reasons for the company that causes a large amount in the opening balance of the equity account.

2. Issuing excess preference stock to involve the investors can be the other reason to get a higher amount of beginning equity balance.

3. Making much profit for the prior years, and keeping them with the retained earnings without expanding the business can be the third reason.