Opening balance

Opening balance
See also
Classification of assets Statement of affairs Accounting concepts Micro Accounting Opening entries Accounting reports Fixed and floating charge Time period concept Inventory analysis

Opening balance is the company's condition at the beginning of operations in a given financial year entered into the program using the account balances resulting from the previous year. The balance is entered into account balances on one page only, with the exception of off-balance accounts for which amounts can be entered on both sides of the account. One should remember about settlements, which in the Opening Balance are a very important element. Settlements must strictly agree with the balances of settlement accounts entered in the Opening Balance

The balance sheet is the basic financial report prepared as at the specified date. This day is called the balance sheet moment. On this day, the assets of the business unit are shown, at the same time in material and financial terms.

Balance sheet features

The balance is characterized by three features. It must be: real, continuous and bright.

1. The truth of the balance is ensured by the fact that it is prepared on the basis of an inventory. An inventory is the basis for an inventory, which is a written pledge of assets and liabilities. Preparing inventory is a basic requirement, and at the same time a condition for drawing up a balance sheet.
2. The continuity of the balance sheet means that the closing balance of the current year should be identical to the opening balance of the following year. The continuity of the property balance is not called into question by two situations in which the closing balance does not equal the opening balance sheet. First, the closing balance may differ from the opening balance when the company is divided into two or more independent units. It may also be a combination of several units in a new enterprise. In this case, the sum of the opening balance of the units created must be equal to the closing balance of the parent entity or vice versa. The second case occurs when introducing an official price change into the means of production or when introducing the denomination of the value of money, e.g. on 1 January. In this case, the closing balance will differ from the opening balance.
3. the clarity of the property balance is achieved by constructing a property balance in accordance with the requirements of the Act.

Parts of the balance sheet

The balance sheet must contain the name of the company, date of preparation, the date for which it was prepared, signatures of persons preparing and approving. The accounting balance requires approval by statutory auditors.

• The left side of the balance sheet showing the assets also bears the name of the company's assets. Its task is to provide information about the structure of assets broken down into non-current assets and current assets as well as their total value. The groups of assets are separated into their individual components.
• The right side of the balance sheet includes liabilities, otherwise known as funds - sources of financing assets with the division into: equity, liabilities and provisions for liabilities. The liabilities analysis provides information about who and to what extent is the owner of the liabilities involved to finance the company's assets.

References

• Calvo, G. A., Izquierdo, A., & Mejia, L. F. (2004). The empirics of sudden stops: the relevance of balance-sheet effects (No. w10520). National Bureau of Economic Research.
• Schneider, M., & Tornell, A. (2004). Balance sheet effects, bailout guarantees and financial crises. The Review of Economic Studies, 71(3), 883-913.
• Allen, M., Setser, B., Keller, C., & Roubini, N. (2002).A balance sheet approach to financial crisis (No. 2002-2210). International Monetary Fund, 12-20.
• Stern, E. (1997).Crisis and learning: A conceptual balance sheet. Journal of contingencies and crisis management, 5(2), 69-86.

Footnotes

Author: Magdalena Lewicka