An opening balance is the amount of funds your company has at the beginning of an accounting period you want to analyse or the one you report to the tax authority: a day, a month, a quarter or a year.
- You start a business. An opening balance is the figure of the first entry in the firm’s accounts.
- Your business has gone through at least 1 accounting period. An opening balance is a figure from the end of your previous accounting period, where it was a closing balance (the amount of funds for at the end of the accounting period).
Bookkeeping services help you to avoid mistakes in your accounts from the start and to keep them neat when your business already operates.
How to calculate the opening balance
If you just start a business, your opening balance is zero and then you start adding what you spend and what you owe. If you already have some funds to put into your bank account, your opening balance is that sum.
If you already have a business, you need some counting to do — adding what you own, and subtracting what you owe. This is actually a formula for a closing balance.
Jane sells flowers. Her opening balance for 1 January 2019 is £10,000. For 2019 YA, she receives payments from clients worth £15,000 and her spendings are £5,000. She counts: £10,000 + £15,000 - £5,000 = £20,000 — and this is Jane’s closing balance for 31 December 2019 (and also an opening balance for 1 January 2020).
So, there is no specific formula to count an opening balance — factually, it is the same as the one for counting a closing balance.
B/D and C/D in accounting
B/D and C/D are the shortened forms used for the balances when you count and mention them in your bookkeeping and accounting.
Balance b/d stands for ‘brought down’ — the one carried forward from the previous accounting period, an opening balance is referred to by this. You can also use b/f for identifying the opening balance, meaning ‘brought forward’.
Balance c/d stands for ‘carried down’ — the one carried down from the ledger to the next accounting period, a closing balance is referred to by this. You can also use c/f for identifying the closing balance, meaning ‘carried forward’.