Every business closes its books at the end of each financial year and starts recording transactions in new books for the new financial year. The balances of all accounts at the end of the year become the opening balances in the new books. The process of recording these balances from the old books into the new books is called the Opening Journal Entry.
Journal Entry:
Example:
ABC Ltd. has the following balances in their different ledger accounts on 1st April 2022:
- Cash: ₹25,000
- Closing Stock: ₹20,000
- Building: ₹80,000
- Debtors: ₹50,000
- Creditors: ₹40,000
Pass the opening journal entry.
Solution:
Note: If the amount of capital is not given in the question, then we can calculate capital as: Capital = Total Assets - Liabilities.