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What is an Opening Balance?
The opening balance can be found on the credit or debit side of the ledger, depending on whether or not the firm has a postive or negative balance.
When they are presentWhen a firm ends an accounting year and it takes the closing balance - the last balance in the accounts at the year-end - and carries it forward to the new financial year accounts. It then becomes the opening balance - the first entry in the new financial year.
Opening balances can also become important if a firm transfers their accounts to a new accounting system. When this occurs, the last entry in the previous accounts will become the opening balance in the firm's new accounts.
The opening balance sheetAt the start of a financial plan, the opening balance can be found on the opening balance sheet.
An operating firm's opening balance data on the opening balance sheet comes from the end balance sheet data of the previous accounting period.
In the case of a new company, the opening balance sheet usually has just two accounts: one being the cash on hand and one being the capital contributed by the company's founders.
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