Opening Balances : Bank Accounts

When you’re managing your accounts, it’s important to get everything right from the very start. Typically, this all begins from your opening balance. It’s important, therefore, to consider the definition of an opening balance and where and how this is to be used.

What is the ‘opening balance’?

The opening balance is the amount of money held in a company’s account at the start of a new financial period. This is the first figure entered into your accounts, whether you’re starting out from scratch or you’re entering into a new financial year.

Once you’re up and running, the closing balance for one accounting period will go forward and become your opening balance for the next one. The closing balance is the difference between all of your credits and debits so, with this in mind, it’s possible to have an opening balance that is either positive or negative.

If you choose to transfer your accounts from one system to another, the last entry in your old system will then go forward as the opening balance for your new accounts.

Having an awareness of the opening and closing balance of your accounts is important if you’re to stay in control of your money and maintain a healthy cashflow.

 

How do you record your opening balance?

When you use KashFlow’s software, there are a couple of ways in which to record your opening balance figure – through the Bank Account Details screen or via a Journal entry.

 

Opening Balance – Bank Account Details

This method will record the Opening Balance as a dummy figure (one-sided entry) that only affects the running Balance as seen within the ‘View/ Add’ screen of the respective Bank Account, and the Reconciliations performed for it.

The value entered will not be considered for any reporting, and therefore your Trial Balance will be less the Opening Balance entered in this manner.

Record your Opening Balance with this method:

 

  1. Navigate to the Bank from the left side-menu: https://app.kashflow.com/#bank
  2. Therein, of the Bank Account you wish to define an Opening Balance for, click the pencil icon of the section to be taken to their respective “Edit Details” page.
  3. In the field headed “Start Balance” enter the amount you wish to record as the Opening Balance for the account. This will not be tied to any Transaction or specific date and will simply exist as a value for the Bank Account pre-dating anything you enter.
  4. Once complete, choose “Save” in the top-right of the screen

 

Please bear in mind this value is not reported by any means beyond being included in the Balance of the Bank Accounts “View/ Add” screen, and the Bank Accounts Reconciliation.

 

Opening Balance – Journal

This method will record the Opening Balance as a monetary movement that will be included in reporting, and will be visible as a Transaction within the Bank Accounts “View/ Add” screen, and Reconciliations.

 

To accomplish this, we must first define a place from which the Opening Balance for the account comes from. In this instance we are going to use a “Suspense Account” Nominal Code which will represent your finances before your KashFlow records.

 

Setting up the Suspense Account

First, you will need to define the Nominal Code to balance the value you are defining as the Bank Accounts Opening Balance

 

  1. Navigate to: Bank > Bank Codes https://app.kashflow.com/banktxtypes.asp
  2. Beneath the table of your Bank Codes will be two editable fields, one containing a predetermined number and the other with “Bank Code Name”. Overwrite with your preferred Nominal Code Number (typically “9999” is used) as well as a Bank Code Name of “Suspense Account”– though these can be anything you want to best fit in line with your financial records. Once done, click “+ Add Bank Code”

 

Creating the Journal

To create a Journal, they must first be enabled for your KashFlow account. Instructions on doing this can be found here.

  1. Navigate to Journal of the left side-menu
  2. Choose to “+ Create” a Journal from the top-right
  3. Specify the date from which you will begin recording data within the Bank Account. This should be the “Start Date” of the Bank Account if it has one, and a day after the Bank Accounts defined “Reconciliation Date”
  4. Choose the category of “Standard Journals” if this is not already selected for you
  5. Define any comment you wish – this is simply going to be what the Journal is listed as. In this instance you could choose “Opening Balance for Bank Accounts”
  6. Unless you have created your template you wish to copy from, the template can remain as “[empty journal]”
  7. Save these parameters and “Create Journal” to then be taken to a screen to enter the Journal Lines
  8. Journals will be populated with two lines automatically assigned to “Other” with blank fields. Of the first line:
  9. Under the Code drop-down list, select the Bank Account you wish to define an Opening Balance for
  10. Within the Narrative field enter what you would like the Transaction to be recorded as within the Bank Account. This can be anything you wish, though “Opening Balance” is commonly used
  11. If the Opening Balance is of a positive value, then you will enter this amount into the Debit column
  12. If the Opening Balance is of a negative value, then you will enter this amount into the Credit column
  13. If you have any other Bank Accounts you wish to define with an Opening Balance for the same day, then you may proceed to repeat the above steps for each Bank Account using the second, and further newly provided lines. New Lines will appear as you type values into the Debit/ Credit fields of the second line onward
  14. Once you have defined all your Bank Account Opening Balances, your Debit and Credit column totals will likely be unbalanced. In the final line of the Journal, select the Suspense Account Nominal Code – or whichever you have decided to use – and enter a balancing value in either the Debit or Credit fields to make the Credit and Debit totals congruous. For example, if the Debit column totals to £10,000 and the Credit Column to £4,000, you would Credit the Suspense Account £6,000 to balance the Journal
  15. Finally, once completed choose to “Save Changes”
  16. There will now be a Transaction within your Bank Accounts specified for the Journal Date, with a value as you have defined

Notes

  • Typically, a Suspense Account Code is only used for Accounts that cannot be directly manipulated such as the Creditor and Debtor Control Account Codes, or those that do not exist within your KashFlow records. As such, this code would be further Credited/ Debited against the Opening Balance of your other Nominals and thus removed from your reports. Further information about doing this can be found in our “Opening Balances : Full” article here. If you are unsure of how you should be recording your data, please refer to your accountant or bookkeeper.

 

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