How To Enter Opening Balances
There are two situations to consider, depending on your situation.
1. Opening Balances for a Brand New Business
If you are starting a new business and using Business Accountz, there are no opening balances. This is because all your accounts start with a zero balance. There is nothing to carry forward from a previous year. Your first transaction will most likely be an injection of money. If so, enter that into the green books (Transfers).
For the self-employed or partnerships the transfer transaction will come from Capital Introduced and go to the Bank. Capital Introduced is an Equity account in your Chart of Accounts.
For Limited Companies it will be from a Shareholder account and go to the Bank. Shareholder accounts are also in Equity. These accounts will have been set up for you when you went through the company setup wizard.
2. Opening Balances for an existing Business
This assumes you have a set of accounts from your previous year which are not already in Business Accountz (note that you only need to enter opening balances once when you first start using Business Accountz).
You will need something called a Trial Balance from your last set of accounts. Don’t worry if you haven’t got this, however, if you used an accountant or bookkeeper then they will be able to supply you with one. It should not cost anything.
A Trial Balance (or TB) is simply a list of every account in your system with a balance. The balances are split into two columns, debits (To) on the left, credits (From)on the right.
If you don’t have a TB, then compile a list of all your accounts and their balances. You will need three columns: Account, Debit (To), Credit (From). Enter each account into the Account column. If the account has a positive balance, put the balance into the debit (To) column. If the account has a negative balance (eg. a business credit card) then put the balance into the credit (From) column.
Either way you should now have a TB. Open the black books (the Journal). Copy each account and its balance directly into the journal, mirroring the debit (To) or credit (from) balance. Enter a description for each such as ‘Opening Balance 2010’.
NOTE: Your debit (To) balances MUST equal your credit (From) balances. If they do not, then you have a problem. You can open a new Equity account (called Equity Suspense Account) to record the difference and balance your books, but note that is NOT a cure of the underlying problem. Please see an accountant if you want to cure the problem properly.
Once you are done, you can check if your books balance by opening the Chart of Accounts and looking at the Current Balance in the very top row, named ‘Chart of Accounts’. It should be zero. The Chart of Accounts row contains every account within the system. It is the balance of all those accounts. If all the money coming in or owed to the business equals all the money going out or owed to suppliers then it will be zero. And that is as it should be.