Opening Balance
Definition
The balance in an account at the start of a period, carried forward from the close of the prior period. Correct opening balances are essential when migrating to new accounting software.
Related Terms in Core Accounting
Posting
The step of transferring amounts from journal entries into the individual accounts of the general ledger. In modern software, posting happens automatically when a transaction is recorded.
Reversing Entry
A journal entry made at the start of a period to cancel a specific adjusting entry from the prior period, simplifying the recording of the actual transaction when it occurs. It prevents double counting of accruals.
Compound Journal Entry
A journal entry that affects more than two accounts at once, with multiple debits and/or credits, while still keeping total debits equal to total credits. Payroll and invoices with tax are common examples.
Ledger vs Journal
The journal is the chronological record where transactions are first entered; the ledger organises those entries by account. The journal answers "what happened and when," the ledger answers "what is the balance of this account."
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