When adding an expense to a date prior to a balance update, the account balance will not be changed and will remain with the value set by the balance update. The amount however, will be reflected in the reports for the category it was added into.

The logic behind this is simple: when you've manually set the balance for an account you correctly checked your balance, so an expense added later to a date prior to the update only explains what you've spent your money on and where the inconsistency came from.

For more details about the balance update, please read the articles in Accounts & Balances.