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Opening Entry

Last updated date: 17th Apr 2024
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Opening Stock Journal Entry

The journal entry is recorded at the beginning of an accounting period for opening the books of accounts. It supports bringing forth the balances in the ledger accounts and is called the opening entry. The opening entry for the ledger account is based on the opening balance sheet. 

The various assets, liabilities, and capital that appear in the balance sheet of the previous accounting period are then brought forward in the books of a present accounting period known as an opening entry. 

What is an Opening Entry?

A business first decides to use the double-entry bookkeeping system, then it needs to record an opening entry in the ledger using the general journal. 

The opening of a firm will vary from business to business, this depends on the inclusion of contents of the opening balance sheet. 

The opening entries are those entries that are being represented in the balance sheet, this is the amount that is brought forward at the beginning of an accounting period from the end of the previous accounting year. The opening balance consists of the assets, capital & liabilities of the company that is being brought from the previous year’s Balance sheet. Check out the official website of Vedantu or download the app for a comprehensive and easy to understand explanation. 

In a going concern type, the closing balance of the previous accounting period becomes the opening balance for the beginning of the next accounting year. The opening balance is then transferred to new ledger books for the new accounting period. While in most organizations, prefer a new ledger for transferring the opening entry. This balance appears on the credit or debit side of the ledger. 

An opening entry, in the books of account, is the initial entry that is used to record the financial transactions which occur at the start of an organization. The contents of the opening entry will typically include the initial cash flow for the firm, which is the funding of the business. 

Opening Entry Example 

On 1st January 2016, IP’s assets and liabilities are 

Assets: Cash in Hand Rs. 8,000, Cash at Bank Rs. 18,000, Stock Rs. 5,000, Account Receivable Rs. 6,000; Building Rs. 800,000, Investment Rs. 42,000; Furniture Rs 50,000.

Liabilities: Accounts Payable 80,000, Loan A/c Rs 120,000

Pass on Opening Journal Entry.







Cash in hand A/c ……… DR…. 8,000

Cash at Bank A/c ………. DR… 18,000

Stock A/c……………..DR 5,000

Account receivable A/c…DR… 6,000

Building A/c………………DR… 800,000

Investment A/c…………DR… 42,000

Furniture A/c …………….DR … 50,000

To, Accounts Payable….CR……80,000

Loan A/c ………………CR ….. 120,000

Capital A/c (Balance) … CR 729000



Opening Assets and Liabilities are transferred to the new Ledger.

Tally Opening Balance Entry

We can alter the opening balances of ledgers to zero by enabling the option of Zero Opening Balance. 

To set the opening balances of ledgers under group: 

  1. Go to Gateway of Tally then, Accounts Info. After this click Ledgers, then go to Multiple Ledgers, then press Alter.

  2. Select the relevant group (example, ‘Sundry Debtors’) from the List of Group. The Multi Ledger Alteration screen appears as shown below in the image

(Image will be uploaded soon)

  1. Press Z: Zero Op Bal to set the opening balances of the ledgers to nil/zero. 

Opening Entries for New Business and Running Business

When a new business is first commenced, the assets and liabilities introduced into the business are required to be incorporated in the books of accounts by an opening entry that is being 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. 

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

Opening Entry in Accountancy

Whenever we start a business or firm we record transactions to maintain records. We do our first entry in a ledger and that first entry done by institutions is called an opening entry or opening statement.

The contents of the opening entry generally include the initial funding as well as any initial debts incurred and assets obtained by the firm.

All firms maintain records and they are called ledgers in accountancy. The ledger records ball transactions carried by the firm. The entry in the ledger is made under single entry or double entry. The merger is divided into two parts where debits and credits of a firm are mentioned. The ledger should be balanced by the end of the  accounting year. This is also called bookkeeping in accountancy.

In continual business, the closing balance of the previous accounting period is an opening balance for the next year that is the current accounting period.

The opening entry of any firm differs based on the business and the opening entry can be either on the debit or credit side of a ledger.

Passing Opening Entry

As the accounting period starts the accountant of a particular firm passes a journal entry that contains all the details of the firm like the opening balance of all assets and liabilities including the capital.

Assets have a debit balance and therefore, assets are put on the debit side of the opening entry, while liabilities have a credit balance and are therefore credited in the opening entry.

A journal entry consists of : 

  • Assets A/c 

  • Liabilities A/c

  • Capital A/c

If the assets exceed all the liabilities, the excess value will be regarded as a value of capital and will be shown as a credit in the opening entry, and if the liabilities overrun the value of the assets, then it will be debited in the opening entry.

FAQs on Opening Entry

1. How will the opening entry be shown in the Balance sheet?

Every firm has some opening entries in their ledger consisting of previous accounting years which are carried forward to the next year. The opening entry indicates a firm's financial position. Opening entry can be either side of a ledger as it depends on the performance of the firm. Log on to the official website of Vedantu or download the app for a detailed explanation.

2. What rules should be followed for preparing an opening journal entry?

The opening journal entry is prepared at the beginning of an accounting period. New books are used for opening the books of accounts every year. The various items are classified in various sections and they are then carried forward either on the debit or credit side of a ledger. For example, assets are written on the debit side and loans on the credit side. The other rules are discussed below:

  •  There should be at least two accounts in the double-entry system format.

  • Journal entries have a specific format so that anyone going through the statements can understand the information present in the accounts.

3. What items are mentioned in opening entries?

In opening entries assets and liabilities are shown in the balance sheet. 

The asset sheet consists of current and noncurrent assets.

  1.  Current assets comprise of :

  • Inventories

  • Current investment and short-term loans and advances.

  1.  Non-current assets comprise of:

  • Tangible assets

  • Intangible assets

Liabilities comprise non-current liabilities and current liabilities.

  1. Non-current liabilities comprise of

  • Long term borrowings

  • Long term provisions

  1. Current liabilities comprise 

  • Short-term borrowings

  • Trade payables.

4. What basic topics are learned by accountancy students?

Debits = credits.

Debits should be written on the left-hand side and credits on the right-hand corner in the ledger 

Students learn about Accounting and its types, terms like profit and loss, equity of owner, liabilities, and assets.

They also learn various types of accounts to be maintained by the firms and about risk management and administration skills during learning.

5. What is meant by an accounting period?

An accounting period is the time frame in which a business prepares its own financial statements and then reports its financial performance and position to the external stakeholders. This could be after three, six, or twelve months. The accounting period coincides with the business's fiscal year.

An accounting period is the period of time that will be covered by a company's financial statements. An accounting period is generally considered to be one month. The accounting period is for a twelve-month period ending on a date other than December 31, then the accounting period is called a fiscal year.

6. What is a double-entry accounting system?

Double-entry refers to an accounting concept where the assets = liabilities + owners' equity. In the double-entry system, the financial transactions are recorded in terms of debits and credits.

Double-entry bookkeeping is the type of accounting system where every transaction is recorded in these two types of accounts - a debit to one account and a credit to another. For example, if a business takes out an Rs. 5000 loan, assets are credited Rs. 5000 and liability are debited Rs. 5000.

7. What is a going concern?

When a company is a going concern it means that the business is predicted to be able to operate for the next 12 months with no threat of liquidation or closure of the business. The fact that it's regarded as a going concern is an important issue, moreover if the company has been struggling financially.