Opening Entry

Download PDF

Opening Stock Journal Entry

Bookmark added to your notes.
View Notes

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 is known as an opening entry.

Opening Entry 

While 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.

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 basically 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.

Solution :






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 a 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 List of Group. The Multi Ledger Alteration screen appears as shown below in the image:

[Image will be uploaded soon]

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

Opening Entries for New Business & 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.

FAQ (Frequently Asked Questions)

1. What is Meant By Accounting Period?

Ans. 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 the three, six, or twelve months. The accounting period coincides with the business' 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 of 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.

2. What is a Double-Entry Accounting System?

Ans. 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.

3. What is a Going Concern?

Ans. 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.