What is a beginning balance?

Definition

A beginning balance is the amount an account shows at the start of a reporting period, before that period's activity is posted. It is a period-start figure, not the conversion load used when books are first set up.

On the books, this is yesterday's ending figure carried forward. Cash on June 1 is whatever cash was left after May closed.

Where it shows up

Balance Sheet: Related to each account's starting figure for the period.

P&L: Related to income and expense accounts resetting at period start after close.

Cash flow: Related to cash's starting figure for the period, not a cash movement.

See also: Ending Balance · Roll-Forward Schedule · Accounting Period

When you open the Balance Sheet for June, each asset, liability, and equity line already has a starting figure. That figure is the beginning balance, and it does not change unless someone restates a prior period.

The Income Statement is different. After closing entries zero income and expense, those accounts begin the new year at zero.

Cash flow reports movement during the period. The beginning cash figure is the starting point for that movement, not a cash-in or cash-out line of its own.

How it works

The general ledger keeps a running total for each account. When a period ends, that running total becomes the next period's beginning balance.

No extra journal entry is needed to create it. Posting during the prior period already did the work.

A Trial Balance printed on the first day of the new period, before any new activity, is a list of those beginning figures. The debit column still equals the credit column, because the books were in balance when the prior period closed.

Balance-sheet accounts carry their beginning figures forward every month. Cash, receivables, payables, and equity all start June with May's last amounts.

Income and expense accounts follow a different pattern. They accumulate during the year, then close to equity, so a January beginning P&L balance is usually zero.

During the period, new postings add to or subtract from the beginning figure. Collections raise cash, and payroll lowers it.

A roll-forward schedule writes this in one place: beginning balance, plus increases, minus decreases, equals the ending balance. The beginning amount is the first line of that math, not the last.

If someone posts a June invoice with a May date, they have changed May's ending figure, and therefore June's beginning figure. That is why books are often locked after the prior period is issued.

Example

A landscaping company starts June with $12,000 in the checking account. That $12,000 is the cash beginning balance, recorded before any June mowing invoices or June payroll.

No June work has been posted yet. The $12,000 is leftover cash from May, not a June collection.

On June 1 the Balance Sheet would show cash of $12,000. The Income Statement for June would still show zero revenue, because June activity has not started.

As June jobs are billed and wages are paid, cash will move. Those later changes belong to June; they do not rewrite the June 1 starting figure.

If the owner later compares May's cash ending figure to June's cash beginning figure, the two should match. A gap means a backdated posting or a conversion load sitting in the wrong period.

Common mix-ups

A beginning balance is not an opening balance. An opening balance is the conversion load when you first set up books or move them to a new system.

A beginning balance is the start-of-period figure after the books are already running. June 1 cash of $12,000 is a beginning balance; the $8,000 loaded into a brand-new QuickBooks file is an opening balance.

A beginning balance is not an ending balance. The ending figure is what the account shows after the period's activity.

June's beginning cash plus June collections minus June payroll becomes June's ending cash. The two figures describe different dates.

A beginning P&L balance is not the same as a beginning Balance Sheet balance. Asset and liability accounts carry forward every month.

Income and expense accounts reset after year-end close, so their January start is usually zero even when cash is not.

Related terms

• Ending Balance: An account's balance at the close of the reporting period.
• Opening Balance: The balance loaded into an account when the books are first set up or moved to a new system.
• Roll-Forward Schedule: A schedule showing how an account moved from its beginning to its ending balance.
• Account Reconciliation: Proving that a ledger balance agrees to independent support.
• Accounting Period: The span of time a set of financial statements covers.
• General Ledger: The master record of every account and every posted transaction.
• Trial Balance: A listing of every ledger account balance, used to check that debits equal credits.
• Supporting Schedule: A detailed worksheet backing up a single line on the financial statements.