Opening Balances – Nominal Ledger

Purpose: To create the balances from the beginning of your financial year or whenever the last Trial Balance was run in a prior system. This is usually only done when starting with a new software system.

Preparation: For your accounting period and cut-off date in your business year, obtain a detailed Trial Balance listing from your current accounting system in sufficient detail to input the historical transactions and opening balances analysis that you require. The detail you need to input depends on – a) whether you have the need for cost centres and b) whether you are starting part way through a financial year when you will need to post journals to P & L accounts. The postings will be in the same period as the Sales and Purchase Ledger postings.

It may be beneficial if this were obtained in a spreadsheet format, to ensure that total debits = total credits..

Complete the Opening Trial Balance – summary opening balances.

This procedure inputs the remainder of your opening Trial Balance and completes Opening Balances data entry.

Recall that we have already entered the opening Sales Ledger Control Account and Purchase Ledger Control Account balances on the Balance Sheet with balancing entries to the Nominal Ledger Suspense Account.

Here we enter all other Nominal Ledger Account balances from the Trial Balance listing except these Sales Ledger Control Account and Purchase Ledger Control Account balances. These balances must be posted to the Nominal Ledger Suspense account in order for the journal to balance and to clear the suspense account before moving forward.

Click Menus > Ledgers > Nominal > Journals > Standard to open the Nominal Ledger – Journal Entry form.
Input the remaining Balance Sheet account balances from the Trial Balance to the relevant Nominal Codes in your new product – if these are opening balances for a new financial year – if not, input the profit and loss account balances as well. Be aware of the date of these entries – Must be the first date of the accounting period or the first date of using the software if entering profit and loss transactions for the year to date. If entering historical data then all transactions will use the original transaction date. (excluding the Sales and Purchase Ledger Control Account balances).
When you have input all these balances, there will be a debit or credit amount displayed as “To balance:” in the form.
Input an entry for this Debit or Credit amount to the Nominal Suspense Account.
OK to post the journal.

The above procedure uses journal entries and so will post the Nominal Ledger V.A.T. Control Account balance (usually a liability, i.e. Credit) and not the detailed Daybook V.A.T. transactions that would be necessary to update the V.A.T. reporting tables in your new product.

If the Sales, Purchase and Nominal opening balances have been input completely and correctly, the Nominal Suspense Account should now have a zero balance – See how to check this with Review Nominal Account Transactions.

Now run a Trial Balance and check the Sales & Purchase and Suspense account balances – then file securely.

Now run the management reports and period end – run the VAT reports then Clear the V.A.T. file.

You should check all of the “Clear analysis” boxes for each Ledger – e.g. Nominal Ledger End of Period form.

Detailed Opening Balances:

The following applies if you have entered detailed opening balances and/or historical transactions to either or both the Sales Ledger and the Purchase Ledger.

The detailed Sales Ledger and Purchase Ledger transactions would have posted V.A.T. records to the V.A.T. Control Account in the Nominal Ledger. If these have not yet been dealt with you should post the VAT balance to Suspense account.

The balance on the Nominal Suspense Account should, in fact, be the same value but opposite of the net Debit or Credit value of these V.A.T. records.

If you printed the V.A.T. Summary from the previous topics, you can check these to confirm.

This is as expected and could have been adjusted for in the Trial Balance journal above. Instead we have kept the steps in this detailed Opening Balances process clear and defined.

The final step, therefore, is to clear the balance on the Nominal Suspense Account and this is done with a journal.

Click Menus > Ledgers > Nominal > Journals > Standard to open the Nominal Ledger – Journal Entry form.
Enter the Debit or Credit value to clear the Nominal Suspense Account balance to zero.
Enter the balancing Credit or Debit to the V.A.T. Control Account.
You will be asked to confirm that you want to post to the V.A.T. Control Account (click OK).
Then prompted to select whether this entry affects Output V.A.T. (sales) or Input V.A.T. (purchases).
Either is acceptable as these will be cleared from the V.A.T. reports in the next step anyway.
OK to post the journal.

Now the balance on the Nominal Suspense Account should be zero – check this with Review Nominal Account Transactions.

Now run a Trial Balance and check the Sales & Purchase and Suspense account balances – then file securely.

Now run the management reports and period end – run the VAT reports then Clear the V.A.T. file.

You should check all of the “Clear analysis” boxes for each Ledger – e.g. Nominal Ledger End of Period form.

Detailed Transactions Opening Balances

If you have opted to transfer all transactions from your current system to you new one you may need to to re-enter nominal journals and nominal cashbook postings. This will require careful preparation and you will need to refer to Posting Nominal Receipts, Posting Nominal Payments and prepare Bank Reconciliations – if in doubt consult your accountant or Prelude distributor.

If your Prelude Desktop licence includes Stock Control, you are now ready to enter your opening stock – next article.