Opening Balance

The opening balance of an account can be found on the credit or debit side of the ledger account. Opening balance is represented by “Balance b/d”. When the opening balance is shown on the debit side then it is said to have a debit balance and when the opening balance is shown on the credit side then it is said to have a credit balance.

To make this concept clear, we will interpret the opening balances of various types of accounts with the help of their modern rules.

Asset

Asset shows positive (+) balance (or) debit balance. According to modern rules of accounting when there is an increase in the value of the asset the particular asset account gets debited and vice-versa. Cash a/c, Bank a/c, Machinery a/c, Building a/c etc., are a few most common examples of asset accounts.

Assets are shown Left Hand Side on the Ledger account and they are represented with the insertion “To” for recording all the debit side entries in a ledger. Opening balance of an asset is recorded by passing an opening entry i.e., “To Balance b/d”.

Liability

Liability shows negative (-) balance (or) credit balance. According to modern rules of accounting when there is an increase in the value of liability the particular liability account gets credited and vice-versa. Creditors a/c, Bills payable a/c, Bank loan a/c etc., are a few most common examples of liability accounts.

Liabilities are shown Right Hand Side on the Ledger account and they are represented with the insertion “By” for recording all the credit side entries in a ledger. Opening balance of liability is recorded by passing an opening entry i.e., “By Balance b/d”.

Capital

Capital shows a negative (-) balance (or) credit balance. According to modern rules of accounting when there is an increase in the value of capital the particular capital account gets credited and vice-versa. Owner’s capital a/c, Partners capital a/c, Share capital a/c etc., are a few most common examples of capital accounts.

Capital is shown Right Hand Side on the Ledger account and they are represented with the insertion “By” for recording all the credit side entries in a ledger. Opening balance of capital is recorded by passing an opening entry i.e., “By Balance b/d”.

Expense

Expense shows positive (+) balance (or) debit balance According to modern rules of accounting when there is an increase in the value of expense the particular expense account gets debited and vice-versa. Salary a/c, Rent a/c, Commission paid a/c etc., are a few most common examples of expense accounts.

Generally, expense accounts get closed by the end of every accounting year and their balances are not carried forward to the next accounting period. Hence there will be no opening balance for the expense account.

Income/Revenue

Income shows the negative (-) balance (or) credit balance. According to modern rules of accounting when there is an increase in the value of income the particular income account gets credited and vice-versa. Discount received a/c, Income received a/c, Rent received a/c etc., are a few most common examples of income accounts.

Generally, income accounts get closed by the end of every accounting year and their balances are not carried forward to the next accounting period. Hence there will be no opening balance for income account.

I have provided you with one exception for your better understanding.

Drawings Account

This is considered as an exception to this question. Drawings account is a contra account to the owner’s capital account because the owner’s withdrawal reduces the value of owner’s equity. Drawings account debit balance is contradictory (opposite) to its anticipated credit balance of the owner’s capital account. Drawings have no opening balance.

Amount (or) goods withdrawn by the proprietor for his personal use is one of the most common examples of drawing.