Opening entries
| Opening entries |
|---|
| See also |
Opening entries (opening journal entries) are accounting 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[1].
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[2].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[3]
Entries in a new account or in a new billing period
The purpose of posting an entry at the beginning of the accounting 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[4].
Footnotes
- ↑ Bhattacharyya A.K. (2012), Essentials of Financial Accounting: Based on IFRS, PHI Learning Pvt. Ltd.
- ↑ Unnibhavi B.M. 2005), Financial Accounting, Atlantic Publishers & Dist
- ↑ Madeira L. (2009), QuickBooks 2010 Solutions Guide for Business Owners and Accountants, Pearson Education
- ↑ Khatri D.K. (2015), Accounting for Management, McGraw-Hill Education
References
- AG Decision Makers (2009), Understanding Double Entry Accounting, Iowa State University Extension
- Bari R.V. (2014), Principles of Book-keeping, DHBVN Hisar
- Bragg S.M. (2010), Journal Entries, John Wiley & Sons, Inc.
- Hofstrand L. (2009), Understanding Double Entry Accounting, Iowa State University Extension
- Kaplan Publishing (2015), [http://financial.kaplan.co.uk/Documents/aat-pbkt-sample-chapters.pdf Processing Bookkeeping Transactions, Kaplan Publishing
- NCERT (2015), Accountancy Textbook Company Accounts and Analysis of Financial Statements for Class, NCERT
- NCERT (2015), Accountancy, NCERT
- Tayin D. (2012), Business Accounts 4th Edition Question Book, Osborne Books Limited
- University of Michigan (2017), Journal Entry Training Guide, University of Michigan
Author: Patryk Schmidt
