Opening Balance of a Business?

Question

If it's a new company, the opening balance would be 0.
then what would be in the next month?

Answer 1

Probably a negative number. Depending on what you borrowed to start the company up. Most companies don't make money during their first month or even first six months, of business. Some companies take years to turn a profit.

Answer 2

When you set up your chart of accounts, you may have a zero balance, but it can't stay that way. You have to invest capital in it.

You would debit your Checking or cash account and credit Owner Equity, if you invested your own, partners or investor's money in the business.

Some times, investor's money is actually put in a long term liability account, and it is treated similar to a loan.

You would debit Checking and credit a Long Term Liability account if you got a capital loan.

When I purchase a house, I have a lot of transactions that take place at once.

I debit an Asset account for the house I just purchased. I then have to credit Checking for my down payment, I then credit a Long Term Liability account, titled with the loan for that property.

Just for those who do not understand accounting, you Debit or Credit asset accounts when you add or subtract from them. You Debit or Credit liability accounts when you SUBTRACT or ADD to them, as they represent a reduction in the over all value of the company.

Remember, you Debits must equal your Credits or you get your ASSetts in trouble. LOL

All joking aside, the Debits and Credits must equal. That is where you get the term Balance Sheet.

Good Luck