When you first create a business file with Clarity Accounting, you may have bank account balances, outstanding receivables, assets, and prior income you’d like to show on your Balance Sheet and Statement of Profit & Loss.

To do so, you must enter a summary of your past business activities.  This can take many steps, and may require some knowledge of bookkeeping terminology, like debits and credits, equity, and retained earnings; if you’re not sure if your ability to do this yourself then we suggest hiring a bookkeeper to assist you.

Step By Step Instructions

Sample opening adjustment

1. If you have income to report for the current fiscal year, divide it into two pieces: paid and receivable
2. For each outstanding invoice, enter an invoice so you can track that receivable
3. If you have expenses to report for the current fiscal year, divide it into two pieces: paid and payables
4. For each outstanding bill you owe, enter a bill so you can track that payable
5. Enter an adjustment with the memo “opening balances”
6. For each bank account and cash, enter it’s current balance into the debit column
7. Calculate and categorize the value of the assets of your business and enter each category’s total value into the debit column
8. For each credit card, business loan, or line of credit carrying a balance you have, enter the amount owing into the credit column
9. For the income you recorded as paid, break it down into rows by Income Account enter the amount of income in the credit column
10. For the expenses you recorded as paid, break it down by Expense Account and enter the amount of expense in the debit column
11. If the owners have given cash to the business in return for shares, create an Equity account for each owner and enter the amount of their contribution into the credit column
12. Add up the two columns to get your total credits and total debits
13. Subtract total debits from total credits to get your retained earnings. Enter this amount in the credit column as “Retained Earnings”; it may be a negative number.
14. Click Add to enter the adjustment and update your account balances.

Notes and Tips

• You can set up accounts directly from the Adjustment form - in the Account dropdown, choose “New Account…”
• When entering outstanding invoices and bills, be sure to enter the correct dates so that the income or expense is reported in the correct fiscal period

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Tags: Accounts, adjustments, opening balance, opening balances

This entry was posted on Friday, November 14th, 2008 at 11:17 pm by Dobes and is filed under Accounts Set Up, Bookkeeping, FAQ, Set Up Instructions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.