When an accounting year ends, the business has a closing balance, which it carries forward to the new financial year. This amount is now the first entry in the books of accounts and acts as the opening balance for the new financial year.
The total funds available in a business’s account at the beginning of a financial year is known as its opening balance. A firm’s account must always have the Opening balance as a first entry when :
1. The firm is entering a new financial year : This closing balance of the previous financial year, is automatically carried forward as the opening balance of the next accounting year
2. The firm is migrating its accounts from a software to another : The closing balance in the existing software will become the opening balance in the new software.
3. The firm is starting accounts for the first time : The opening balance sheet usually has just two accounts: 1. Cash on hand, in Bank AND 2. Capital contributed by the company's founders.
Depending on a firms financial position, the opening balance may be found on the debit or credit side of the ledger.
To get the opening balance of an organisation, you will need to run the trial balance report.
MTD ready accounting
software for small