First-bit software works based on the double-entry accounting rule. This rule requires that each transaction be recorded with equal debit and credit entries in the General Ledger, ensuring that the total debits match the total credits. This rule maintains the accounting equation: Assets = Liabilities + Equity.
When a customer begins using a new database, they should start by creating an opening balance document. This is essential when transitioning accounting data to a new application or when first using the application, whether moving from manual records or an existing system. With an Opening Balances Entering document, you can input the starting balances for various accounts. These documents should reflect the GL account balances as of the year-end date or the end of the period just before you start recording current transactions in the application.
To record the opening balance, various account sections must be considered, and the corresponding General Ledger (GL) balances should be entered based on these sections.
Since the system follows the double-entry accounting principle, opening balances must consider debit and credit entries. When creating a document for each section, one side will reflect the General Ledger (GL) accounts for the selected section, while the other side will represent the service account. These entries must ultimately be reconciled and balanced to ensure the data's accuracy and completeness.
If there is no match and a balance remains in the service account, it indicates that the debit or credit side balance has not yet been fully entered, and an inaccurate final balance is recorded.
For example-
when recording the opening balance for inventory, the resulting General Ledger (GL) entry will be:
- Debit (DR) Goods: Represents the value of the inventory being recorded.
- Credit (CR) Service: Corresponds to the credit entry to balance the debit.
When reviewing the Trial Balance report, if the service account shows an unresolved balance of AED 1,000 on the debit side, it indicates that either the asset has not been fully recorded or the liability/capital entries are not accurate. This discrepancy suggests that a review is necessary to ensure that all entries are accurately and completely entered.
Once all data has been accurately entered, the service account should have no closing balance. The closing balances on both the debit and credit sides will match.
The account labeled 0000000 Service is designated exclusively for entering opening balances and should not be used for any other transactions.
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