Opening entries (opening journal entries) are accouting entries in two different situations:
- first entries in the newly established company,
- entries in a new account or in a new billing period.
The accounting cycle begins the registration of the opening entry in the general ledger. Each cycle ends with the preparation of a financial report. All accounting activities are aimed at preparing and presenting financial summaries.
First entries in the newly established company
In this case, the opening entries are called initial entries, and their main function is to post the transactions created at the beginning of the enterprise's existence. They can contain the initial sources of financing of the company, assets acquired and all debts incurred. After the company decides to use the double entry bookkeeping system, it is necessary to register the opening entry in the general ledger using the journal proper.The opening entry can be in various forms depending on the type of business activity and the opening balance sheet. Registering the initial entry and transferring the balances of the previous accounting period to the next enables a reliable picture of the entire business situation
Entries in a new account or in a new billing period
The purpose of posting an entry at the beginning of the accouting period is preparing the opening balance for both the account of liabilities and the account of assets in the general ledger. The point of maintaining the balance of liabilities and assets between the previous financial year and the next accounting year is bringing the account balance to zero. All opening journal entries are placed in the general journal. Different transactions are saved in this journal according to their chronology.
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Author: Patryk Schmidt