Opening balances when you switch accounting software: a worked example

What is an opening balance?

An opening balance is the amount an account holds on the first day of a new set of books, carried over from the old ones. Cash in hand, the bank balance, what each customer owes you, what you owe each supplier, the loan, your stock and your machines all have one.

When you switch software, the opening balances come from one document: the trial balance of the old system as of the cut-over date. If you move on 1 October 2026, you take the trial balance as of 30 September 2026 and enter it, dated 30 September, in the new system. Everything from 1 October onwards is entered as live transactions.

• Opening date: the last day in the old system, here 30 September 2026.
• Cut-over date: the first day of live work in the new system, here 1 October 2026.
• Source: the closing trial balance of the old books, agreed with your accountant before you start.

What is the Opening Balance Equity account?

Opening Balance Equity is a temporary account that takes the other side of every opening figure you enter. Each opening amount is still a double entry: a bank balance of $38,620 is Dr Bank, Cr Opening Balance Equity. A supplier balance is Dr Opening Balance Equity, Cr the supplier.

Once every line of the old trial balance is in, including your capital and reserves, the debits and credits through Opening Balance Equity cancel out and the account ends at zero. If it does not, a line is missing, entered twice or entered on the wrong side.

Why must opening balances balance?

Opening balances must balance because they are a trial balance, and a trial balance with unequal sides means the books are wrong before the first live invoice. Every report you run afterwards, the balance sheet first, carries the same error.

A balance left in Opening Balance Equity is the most common symptom. It sits in the equity section looking like capital, so the balance sheet still totals, and the mistake hides for months. Treat a non-zero Opening Balance Equity as a to-do, not a figure.

How do you enter opening balances from a trial balance?

Here is the cut-over at Harbour Steel Furniture, the fictional steel furniture maker on this site, which moves on 1 October 2026, with amounts in US dollars. Its accountant signs off this trial balance as of 30 September 2026.

A mid-year switch brings in profit earned since the start of the financial year. Here it is carried as one line, which is a common choice; your accountant decides whether it comes across as one line or account by account.

1. 1

   Enter account balances

   Cash, bank, plant and machinery, accumulated depreciation, the loan, tax payable, capital and reserves go in against their accounts, debit or credit as in the trial balance.

2. 2

   Enter each customer and supplier

   The $23,100 owed by customers and the $18,470 owed to suppliers go in party by party, never as one lump figure.

3. 3

   Review the balancing line

   These lines total $125,970 debit and $147,870 credit. The difference, $21,900, is a debit to Opening Balance Equity. It equals the stock, which has not been entered yet.

4. 4

   Enter opening stock at cost

   Stock goes in by product with quantity and cost per unit, which posts Dr Inventory $21,900, Cr Opening Balance Equity $21,900. Opening Balance Equity is now zero.

5. 5

   Compare and lock

   Run the new trial balance and compare it line by line with the old one. When they match, lock the books through 30 September 2026 so nobody posts into the old period by mistake.

Why are customer and supplier balances entered per party?

Customer and supplier balances are entered per party because every receivable report works party by party. A single figure of $23,100 in receivables tells you nothing about who owes it or how late it is.

• Statements: each customer's statement of account opens with their balance, so Riverside Stores sees $11,776 brought forward, not zero.
• Ageing: overdue reports bucket what each party owes; a lump sum cannot be chased.
• Payments: when Oakfield Traders pays $6,490 in October, the money has to settle a balance on its own account, not float in a general receivables line.
• Suppliers: the same applies in reverse. Atlas Steel Supply at $14,850 and Crown Paint House at $3,620 make up the $18,470 payable.

Do not re-raise old invoices as new sales invoices in the new system. A sales invoice counts the sale, the tax and the stock issue again, all of which already happened in the old books.

How is opening stock valued at weighted average cost?

Opening stock is entered with a quantity and a cost per unit for every product, because the cost becomes the starting weighted average for every sale that follows. Quantity alone gives a stock value of zero and margins that look too good.

When Harbour Steel buys 20 racks at $332.40 on 1 October, the new average is ($10,200 + $6,648) ÷ 54 = $312. The opening stock carries 34 of the 54 racks in that average. The full method is in weighted average cost explained.

Why do fixed assets go in at cost and accumulated depreciation?

Fixed assets go in as two figures, original cost and accumulated depreciation, because depreciation, disposal and the asset register all start from cost. Entering only the net book value loses the history. Enter each asset once, as account balances or in an asset register, never both.

Harbour Steel's press and welding line cost $60,000 and has $18,000 of depreciation to date, so its book value is $42,000. If the machine is sold later, the gain or loss is worked out against both numbers. If only $42,000 had been entered, the balance sheet would look the same today but the cost of the asset would be wrong for every report that follows.

What does the balance sheet look like on the opening date?

The balance sheet on the opening date should match the old system's balance sheet to the cent, with Opening Balance Equity at zero.

Which opening balance checks should you run before going live?

Run these checks on the opening date, before the first live invoice, while a fix is still a single correction:

• The new trial balance matches the old one line by line
• Opening Balance Equity is zero
• Every customer and supplier balance matches the outstanding list from the old system
• Stock value by product equals the Inventory account balance
• Fixed assets show cost and accumulated depreciation separately
• Bank balance agrees with the bank statement for the opening date
• The old period is locked so nothing posts before the cut-over date

How does SimpleERP handle opening balances?

SimpleERP has an opening balances wizard: one step for account balances, one for each customer and supplier, then a review showing a single journal with the balancing line to Opening Balance Equity. Opening stock is entered by product, through a stock adjustment or an import, at quantity and cost. Settings → Import data can also bring account and party balances and each unpaid bill from a spreadsheet or a Zoho Books export, dated the day before the cut-over.

• Manual journals must balance; the database refuses one that does not.
• The stock screen shows total stock value beside the Inventory account balance and the difference between them.
• One accounting lock date freezes everything up to the opening date.
• Trial balance and balance sheet export to CSV for your accountant to compare with the old books.

Read more on the accounting software page, or see the whole move in how to switch from spreadsheets to cloud ERP.