Debitoor Dictionary

Accounting terms explained in a simple way

Over 150 Articles for Founders and Entrepreneurs

  1. Capital
  2. Cash
  3. Closing balance
  4. Year end

Opening balance - What is the opening balance?

The opening balance is the balance that is brought forward at the beginning of an accounting period from the end of a previous accounting period or when starting out

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The opening balance is the amount of funds in a company's account at the beginning of a new financial period. It is the first entry in the accounts, either when a company is first starting up its accounts or after a year-end.

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 be on the credit or debit side of the ledger.

When an opening balance is present

Opening balances are most important when a company finishes an accounting year, and ends up with a closing balance - the last balance in the accounts. This balance is carried forward to the new financial year accounts and then becomes the opening balance - the first entry in the new accounting period.

In addition, opening balances are important if you transfer your accounts from one accounting system to another. In this case, the last entry in the old accounts is the opening balance in the new accounts.

Opening balance sheet

The opening balance is used in the beginning of a financial plan on the opening balance sheet. The length of time that a company has been operating determines what should appear on the opening balance sheet.

In case of an operating business, the data in the opening balance sheet comes from the balance sheet prepared at the end of the previous accounting period; in case of a new business, the opening balance sheet normally has only two accounts: cash on hand and capital contributed by the founders of the company.

Opening balance in accounting

Maintaining a record of the closing and opening balance in the financial accounts of your business is a pillar of strong accounting practises. This is one of the main aspects of managing your cash flow and keeping track of a company’s financial health.

The closing balance for an accounting period is the sum of the differences between all of the credits and debits experienced by a business over that period. This amount is then carried over to the next accounting period to be used as the opening balance.

Opening balance and Debitoor

Accounting and invoicing software like Debitoor is designed to simplify this process and make it easier to stay on top of your accounts by giving you the tools to enter income and expenses and track changes in your cash flow.

Your balances are automatically carried over as you continue your business, allowing you to seamlessly keep track of your business finances.