Our accounting Start at 1 April and end on 31 of March every year
Therefore the accounts closed on 31 of the march have closing balances and the accounts on 1 April have opening balances.
Example :
Expense paid in advance at the end of the accounting year is Prepaid expense.
Suppose stationary purchase during a year Rs 12,000 but the stationary unused left Rs 5,000
therefore we have to pass an entry at the end of the accounting year
Unused stationary A/c 5,000
To stationary A/c 5,000
(being stationary unused)
Note: This unused stationery is an asset by nature and it can be transferred to next year as opening unused stationery.
Similarly, our prepaid salary, Prepaid rent, and all prepaid expense which not paid in the particular accounting period are transfer to the next accounting year as the opening.
Note: Expense is not transferred to the next accounting year its only asset and liabilities which are transfer to the next accounting year. but expense which are outstanding and prepaid are shown in Profit and loss and trading accounts.