What are opening balances?
Definition of opening balances
Opening balances are the amounts that your business has in each of its accounts at the start of a particular period of time.
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The period of time in question may be when you change to a new accounting software system, or it may be a new accounting year for your business. The opening balances will be listed all together on your trial balance.
Example of opening balances:
If you are looking at a trial balance on the first day of a new accounting year, it will show opening balances only for the balance sheet accounts, i.e. the asset accounts and liability accounts. If you’re looking at a trial balance part-way through your accounting year, it will show opening balances for all your business’s nominal accounts.
Frequently Asked Questions
How do I know when I’ve entered all my opening balances into a new accounting software system?
At any time there must be equal and opposite debit and credit entries, so once you’ve entered all your opening balances, there will be equal and opposite debit and credit entries. If any account balances are missing or are incorrect, the debits and credits will not add up to the same amount.
Got questions? Ask Emily!
FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.