Opening Balance in accounting refers to the amount carried forward from the previous accounting period into the current period. It reflects the financial position of an account at the beginning of a new financial year and is used as the base for all further accounting entries.
- Asset accounts (like Cash, Debtors, Stock) normally have a debit opening balance.
- Liability accounts (like Loans, Creditors, Capital) have credit opening balances.
- Only Balance Sheet-related ledgers carry forward opening balances.
- Appears as the first entry in the ledger in the new financial year.
- For a new business, the opening balance is generally zero or capital introduced.
a) Method 1 – Opening Balances through Ledgers
In this method, the opening balances are entered directly while creating the ledger accounts such as Cash, Bank, Debtors, Creditors, Capital, etc. This is the most common and simple method used in accounting software like Tally during company setup.
🔹 Significance:
- Easy for beginners and suitable for small businesses
- Ensures ledger-wise clarity and completeness
- Ideal when migrating from manual records to software
Ledger-wise Opening Balances:
| Ledger | Type | Opening Balance |
| Cash | Current Assets | ₹10,000 Dr |
| ABC Supplier Ltd. | Sundry Creditors | ₹5,000 Cr |
| Capital A/c | Capital | ₹5,000 Cr |
| Closing Stock | Current Assets | ₹20,000 Dr |
| Mr. X Loan A/c | Loans | ₹1,00,000 Cr |
b) Method 2 – Opening Balances (through Simple Journal Entries)
This refined method is used when multiple ledgers exist under a single group, and instead of cluttering the journal, you summarize entries by ledger group using Opening Balance Control A/c.
🔹 Significance:
- Suitable for clean, quick opening setup
- Useful during ERP migration or bulk balance entry
- Recommended for accountants with journal entry knowledge
🔹 Example: Opening Journal Entry (at the beginning of the financial year)
| Date | Particulars | Debit ₹ | Credit ₹ | |
| 1-Apr-xxxx | Cash A/c | Dr | 25000 | |
| Accounts Receivable A/c | Dr | 45000 | ||
| Furniture A/c | Dr | 15000 | ||
| Stock A/c | Dr | 35000 | ||
| To Accounts Payable A/c | 27000 | |||
| To Loan Payable A/c | 75000 | |||
| To Capital A/c | 28000 |
c) Method 3 – Opening Balance (through Control Ledger A/c – Journal Entries)
This refined method is used when multiple ledgers exist under a single group, and instead of cluttering the journal, you summarize entries by ledger group using Opening Balance Control A/c.
🔹 Example: Fixed Assets Group (at the beginning of the financial year)
| Date | Particulars | Debit ₹ | Credit ₹ | |
| 1-Apr-xxxx | Furniture A/c | Dr | 1,00,000 | |
| Computers A/c | Dr | 2,00,000 | ||
| Office Equipment A/c | Dr | 50,000 | ||
| To Opening Balance Control A/c | 3,50,000 | |||
🔹 Example: Loan Liabilities Group
| Date | Particulars | Debit ₹ | Credit ₹ | |
| 1-Apr-xxxx | Opening Balance Control A/c | Dr | 4,00,000 | |
| To Bank Loan A/c | 2,50,000 | |||
| To Vehicle Loan A/c | 50,000 | |||
🔹 Example: Sundry Debtors Group
| Date | Particulars | Debit ₹ | Credit ₹ | |
| 1-Apr-xxxx | Sundry Debtor A A/c | Dr | 4,00,000 | |
| Sundry Debtor B A/c | Dr | 2,00,000 | ||
| To Sundry Debtor C A/c | 50,000 | |||
| To Opening Balance Control A/c | 5,50,000 | |||
🔹 Example: Final Step – Adjust Opening Balance Control A/c
| Date | Particulars | Debit ₹ | Credit ₹ | |
| 1-Apr-xxxx | Opening Balance Control A/c | Dr | XXXX | |
| To Capital A/c | XXXX | |||