Starting a new business? Get 40% off our accountancy services for 3 months! 😎

x

If you’re new to business accounting, there’s may be some unfamiliar terms coming your way. As part of our series of accounting FAQs, we cover common accountancy terms to help you understand exactly what everything means.

This time we’re covering opening and closing balances. You’ll come across these as soon as you do your accounts, or start a new financial period.

What is an opening balance?

An opening balance is the balance of an account at the start of an accounting period. It’s brought forward from the closing balance of the previous accounting period.

When you start a new business your opening balances are zero, unless you spent money before setting it up. Money from investors or lenders will be entered as transactions during the accounting period.
 

Online accountancy services

Get a quote and see how much you could be saving!

Get an instant quote

What is a closing balance?

The closing balance is the amount remaining in an account at the end of an accounting period. Again, this can be a debit or credit (a positive or a minus), after recording all of the transactions for that period in your bookkeeping.

To find the closing balance of an accounting period, calculate the total credits and total debits for that period, and work out the difference between them. This balance is what you’ll bring forward as your opening balance in the new accounting period.

What are opening and closing balances for?

If you switch from one accounting system to another, your opening and closing balances are key to starting your new records accurately.

It’s important to include the opening balances in your accounts to avoid skewing the figures for that accounting period. Failing to do so could, for example, show less or more liabilities, less or more assets, less or more capital, and so on. Not a strong basis for decision making!

Can I use accounting software to work them out?

Accounting software (such as our very own Pandle!) automatically generates opening and closing balances in your reporting, so you don’t have to think about them.

The beauty of cloud accounting software is that you can load up your records wherever you are rather than waiting to get back to your desk, so you’ll always have a real-time view of your business’ finances.

 
Our online accountants and bookkeepers can help you manage your accounts. Learn more about our online accounting services. Call us on 020 3355 4047, and get an instant online quote.

About The Author

Dean Salmon

I'm an AAT and ACA qualified Chartered Accountant with over 13 years experience working with businesses, contractors and sole traders. I also love watching live music, and quizzes! Learn more about Dean.

More posts by this author
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments

Read more posts...

The Accountancy Partnership – Our Positive Reviews

Here at The Accountancy Partnership, we’re proud of our customer reviews The reviews we receive from our customers show how hard we…

Read More

What is a CIS Statement?

Back in the day (when tax returns were done through the post!), HMRC decided to clamp down on the construction industry. They…

Read More

Do Influencers Pay Tax?

The occupation of ‘influencer’ is more popular than ever, but there isn’t much information out there on how to pay taxes if…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.

Bookkeeping

You will receive our bookkeeping software Pandle for free, as part of your package.

You can use this to complete your own bookkeeping, or we can provide a quote to complete your bookkeeping for you.

Please select and option below:

I will do my own bookkeeping
I want you to do my bookkeeping

Call us on 020 3355 4047 if you’re not sure.