Hi, I am a new student who has just passed Level 2. I am currently playing around with Sage and Quickbooks just trying to get my head around everything.
At the moment I am playing around with a friend's old accounts trying to add them to a double entry system. He has given me the year accounts that his accountant has given him. I have been working on trying to set up the opening balances So are I have created debit entries for the current assets and credit entries for currently liabilities everything balances except for a small amount and this appears on the balance sheet as net liabilities and then eventually at the bottom of the balance sheet as balance carried forward.
What is this balance carried forward? Is that the capital in the business?
Your balancing account should be the Opening Balance Equity Account. You should be posting everything dated the last day of the previous financial year. Once you have finished posting all your closing TB entries, you should have a balance in Opening Balance Equity that matches the brought forward retained earnings. The last thing you will do is journal the OBE to Retained Earnings - also on the last day of the previous FY. This will ensure that the first day of the new FY has the correct retained earnings balance carried forward for the new year.
The balance carried forward is the shareholders equity. It is the value of the business at the date of the balance sheet. Assets rather than just capital