When a new accounting year begins, the previous year's balances in different accounts are brought forward to the new books of accounts.

This is done by means of a journal entry called 'opening entry'. In this entry all assets accounts are debited and liabilities accounts (including owner's capital account) are credited.

If, however, capital account balance is not given, it can be worked out by deducting other liabilities from the total assets.

Illustration

Mr. Avinash has the following balances of assets and liabilities on December 31, 1986.

Cash in hand Rs. 2,500 Stock of goods Rs. 22,500

Furniture Rs. 5,000 Bank Loan Rs. 10,000

Pass the opening entry on January 1, 1987.