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Once the new company has been set up, the General Ledger requires some additional preparation before any transactions can be processed. The following steps pertain to establishing the opening balances for the company:
Step 1: Determine Opening Balance Information
Normally, the start of use of the General Ledger module does not correspond to the start of existence of each company. Thus, opening balances at the time the General Ledger is set up must be entered so that on-going balances (for subsequent periods after the General Ledger is first set up) have the correct closing balances in each General Ledger account.
For example, suppose the user is setting up a company in the General Ledger that is currently in its fourth period of a twelve-period fiscal year. The user may have incurred expenses and received revenue during periods one, two, and three. Undoubtedly, the Accounts Payable and Accounts Receivable balances are different now than they were at the beginning of the year.
If the user begins processing debits and credits right now, without entering opening balances, all the accounts will have $0.00 recorded for periods one, two, and three. At the end of the fourth period, when the user tries to print a trial balance, only debits and credits entered for period four will be shown. This will be incorrect, because debits and credits were processed for periods one, two, and three (presumably from the previous accounting system used).
The balance of the debits and credits for each account at the end of period three represents the opening balance for period four. These opening balance amounts must be entered before the user begins processing period four debits and credits.
The last date of use of the old accounting system will become the opening balance date for the new system. That is, the balance of the debits and credits in each General Ledger account as of the last date of use of the old system becomes the opening balance for each account in the new system.
Ideally, when setting up a new CMiC system, the best time to enter opening balances is at the start of a new fiscal year. At the beginning of the year, the user doesn't have to enter balances for revenue and expense accounts, since the balances in those accounts must be zero dollars anyway.
Step 2: Determine Source of Opening Balances to be Entered
If the opening balances will be electronically transferred from the previous accounting system, skip to Step 4 to confirm the electronic transfer.
Step 3: Enter Opening Balances
Case 1: Beginning of New Fiscal Year
If entering opening account balances for a new company for the beginning of a new fiscal year, enter the closing balances for each account for the last day of the last period in the previous year using the Enter Transactions screen (standard Treeview path: General Ledger > Transactions > Enter Transactions). One disposition line will be required for each account that has a non-zero balance. The total batch will be the equivalent of a trial balance run for the period of the balances.
Then, use the Prepare New Year Accounts screen (standard Treeview path: General Ledger > Period End > Perform Year End) to set up the account opening balances for the new year.
Case 2: After Beginning of New Fiscal Year
If entering opening account balances for a new company after the beginning of a new fiscal year, enter the closing balances for each account for the last day of the previous period using the Enter Transactions screen (standard Treeview path: General Ledger > Transactions > Enter Transactions), which will update the account’s balance for the rest of the periods in the year. One disposition line will be required for each account that has a non-zero balance, and the total batch will be the equivalent of a trial balance run for the period of the balances.
The normal procedure should be followed for editing and posting of this special batch of opening balance transactions. Refer to General Ledger - Transactions for more information.
Step 4: Print a Trial Balance Report
Verify that the balance for each account is correct, using a trial balance report from the previous accounting system for comparison (standard Treeview path: General Ledger > Reports > Trial Balance by Account Report).