An opening balance is the amount in an account at the beginning of an accounting period. It is simply the closing balance of the period before, carried forward.
What it means
Accounts do not reset between periods - a bank account or a liability continues from where it left off. The opening balance, often marked "brought forward", is that continuing figure. Balance-sheet accounts carry their balances forward indefinitely; income and expense accounts are closed off to zero at year-end, so their opening balance is nil each year.
Where it fits in
Opening balances matter when setting up or switching accounting systems, and they parallel the take-on values used in payroll - both carry prior figures forward so the new period starts from the correct position rather than from zero.
Key rules
- An account's balance at the start of a period.
- Equal to the prior period's closing balance.
- Balance-sheet accounts carry forward; income and expense accounts reset yearly.
- Critical when migrating or opening a new set of books.
