Understanding Accounting Terms: Opening and Closing Balances | The Accountancy Partnership (2024)

FAQs

Understanding Accounting Terms: Opening and Closing Balances | The Accountancy Partnership? ›

An opening balance is the balance of an account at the start of an accounting period. It's brought forward from the closing balance of the previous accounting period. When you start a new business your opening balances are zero, unless you spent money before setting it up.

The beginning balance represents the total balance of an account as of the start date of a new fiscal year or the date you started using Total Office Manager. The ending balance is the balance of an account at the end of the fiscal year or the end of a specific period. This does not have to be an entire year.

The calculation involves subtracting the debits from the credits - and the difference between the two becomes your business' closing balance. Whatever the difference is, whether negative or positive amount - that will be the closing balance of a business. Now this closing balance transitions into the opening balance.

An opening balance is the amount in an account at the start of an accounting period. You might hear it referred to as the amount 'brought forward' (BF) from the previous period. It can apply to bank accounts or your financial records. Unfortunately, opening balances can be debit amounts, as well as credits.

Opening entry is referred to as the first entry that is recorded or which is brought forward from a previous accounting period to the new accounting period. In an ongoing business, the closing balance of the previous accounting period serves as an opening balance for the current accounting period.

Quite simply, the opening balance of an account is the amount of money, negative or positive, in your account at the start of the accounting period. The overwhelming majority of the time, this will be the amount of the closing balance from the previous period brought forward.

Beginning Inventory = Sales (COGS) + Ending Inventory - Purchases (inventory added to stock). Sales (COGS) is the cost of goods sold, ending inventory is the inventory value at the end of the accounting period, and purchases are the total value of inventory added to stock during the accounting period.

If you want to pay off your entire credit card debt for the month, the closing balance is the amount you'll need to pay.

An opening balance can either be a debit or credit. If it's an asset then opening balance is debit. If it's a liability then opening balance is credit.

What is the short form of opening balance and closing balance? ›

B/D and C/D are abbreviations used in accounting when referring to the opening balance and closing balance of a business. Balance B/D means “brought down”, and refers to the amount that has been carried forward from a previous accounting period, which is also known as the opening balance.

The ledger balance is the opening balance in the bank account the next morning and remains the same all day. The ledger balance is also often referred to as the current balance and is different than the available balance in an account.

Balance C/f stands for Balance Carried Forward. Balance B/f stands for Balance Brought Down. Balance c/f are those closing balances (or balancing amount) at the end of the month that you wish to carry forward to next month or Previous balance on an account which is carried over to the next billing period.

There are four closing entries; closing revenues to income summary, closing expenses to income summary, closing income summary to retained earnings, and close dividends to retained earnings.

A closing entry is a journal entry made at the end of an accounting period. It involves shifting data from temporary accounts on the income statement to permanent accounts on the balance sheet. Temporary accounts include revenue, expenses, and dividends. These accounts must be closed at the end of the accounting year.

Key Takeaways

A net loss occurs when the sum total of expenses exceeds the total income or revenue generated by a business, project, transaction, or investment. Businesses would report a net loss on the income statement, effectively as a negative net profit.

Differences Between a Beginning Balance and an Ending Balance. The difference is just the date. One is entered at the beginning of the period (like the month) and the other is entered and the end of the period.

Ending balance means, with respect to a Billing Cycle, the total amount owing with respect to the Account at the close of the Billing Cycle.

Your statement balance typically shows what you owe on your credit card at the end of your last billing cycle. Your current balance, however, will typically reflect the total amount that you owe at any given moment.

The ending balance within your accounting system represents the total of all assets, equity, and liabilities.