In Accounting Assets and Liabilities are transferred from one financial year to another financial years .
Opening Entries are those entries which are made at the starting of accounting years .
The opening balance is usually that balance which is brought forward at the beginning of an accounting period from the end of a previous accounting period. The opening balance is the amount of capital or fund in a company’s account at the start of a new financial period. It is the very first entry in the accounts.
In Accounting our Financial Years start from 1 April and ends at 31 March.
Like Financial Year start at 1 April 2020 and ends at 31 March 2021.
The last year Closing balances are next year Opening balances.
Example Last year closing is 31 March 2020 and opening will be 1 April 2021.
Note : Only Assets and Liabilities are transferred from one year to another years Profit and loss earned during the year is transferred to Capital accounts of the owner which is Liability of the business therefore it is adjusted in Capital Accounts .
In an operating firm, the ending balance at the end of one month or year becomes the opening balance for the beginning of the next month or accounting year. The opening balance may appear on the credit or debit side of the ledger, as the case may be!
Opening entries are those entices where Assets are debited and Liabilities are credited in the books of Accounts.
Opening balance journal entry example
Cash in Hand Rs 100000 Bank Balance : Rs.200000 Furniture Rs 50000 Computer Rs 50000 Stock in Hand Rs 200000 Debtors X Rs 200000 Y Rs 100000 Z Rs. 50000
Loan from Bank Rs 1000000 Creditors A Rs 100,000
Note if the credit side is less the amount will be added to the Capital Accounts .
Similar If the Asset side side is less the amount will be added to the Asset side in Goodwill Accounts as per
Cash A/c Dr
Bank A/c Dr
Furniture A/c Dr.
Computer A/c Dr
Stock A/c Dr.
To Capital A/c
To Loan A/c
(being Opening entries in the books of Accounts)
Ledger of opening accounts
Lets the example of above journal entry when we have to make the ledger accounts of these balance than we have to considered the ledger balance of accounts such as
To bal B/d
Bank have debit balance that’s why they are debited in journal enrty now when they carry forward hey are brought down from last year hence they on debit side of bank ledger .
To bal B/d
Capital accounts have credit balance therefore their credit side is credited when we transfer them to ledger from last year .
Similarly, we have to make ledger to other accounts in the books.
Why opening entry are pass ?
It is to record the opening balances of various accounts that are being transferred from the books of the previous year to be books of the New Year.
What is the difference between closing entries and opening entry.
It is the very first entry in the books of accounts. In an operating entity, the closing balance at the end of one month or year becomes the opening balance for the beginning of the next month or accounting year. The opening balance will be appearing on the credit or debit side of the ledger.