Opening Entry : Definition, Journal Entry etc.

Definition of Opening Entry

The Opening Entries is the balance sheet amount which is brought forward at the beginning of an accounting period from the end of previous accounting. The opening balance consists of Assets, Capital & Liabilities of the company brought from previous year’s Balance sheet.

In a going concern, the closing balance of previous accounting period becomes the opening balance for the beginning of the next accounting year. The opening balance is transferred to a new ledger books for new accounting period, or in a new folio in the same ledger. But most of the organisations prefer new ledger for transferring opening entry. This balance are appeared on the credit or debt side of the ledger.

The opening entry is passed by debiting all the assets of the company shown on the balance sheet and crediting all liabilities including capital. If the amount of Capital is not given, then this can be determined by accounting equation:

Assets = Liabilities + Capital

Capital = Assets – Liabilities

Opening Entries for new Business & Running Business

When a new business is commenced, the assets and liabilities brought into the business are to be incorporated in the books of accounts by an opening entry passed through the General Journal by debiting the assets and crediting the liabilities brought in and also crediting the Capital Account with the excess of assets over liabilities.

In case of running business, opening entry is necessary at the beginning of a new accounting period when new books of accounts are introduced to record the balance of assets, liabilities and capital brought forward from a previous period.

Again, a firm keeping accounts under single entry system may decide to convert into double entry system. An opening entry is required on the date of such conversion.

Example of Opening Entries

On 1st January,2019, Imperial Plc’s assets and liabilities are:

Assets: Cash in Hand Rs. 6,000, Cash at Bank Rs. 17,000, Stock Rs. 3,000, Account Receivable Rs. 7,000; Building Rs. 500,000, Investment Rs. 35,000; Furniture Rs 40,000.

Liabilities: Accounts Payable 50,000, Loan A/c Rs 130,000

Pass on Opening Journal Entry.

Solution :

DateParticularsL.FDebitCredit
Cash in hand A/c ……… DR…. 6,000
Cash at Bank A/c ………. DR… 17,000
Stock A/c……………………..DR… 3,000
Account receivable A/c…DR… 7,000
Building A/c………………… DR… 500,000
Investment A/c……………..DR… 35,000
Furniture A/c ……………….DR … 40,000

To, Accounts Payable ….CR……. 50,000
Loan A/c ………………….. CR ….. 130,000
Capital A/c (Balance) …. CR … 428,000
608,000







608,000
Being Opening Assets and Liabilities are transferred to new Ledger.

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