Opening balances are the account balances at the beginning of a new accounting period or when setting up a new accounting system. They carry forward from the previous period's closing balances.
Opening balances are the starting point for a new accounting period. In an ongoing system, the opening balances are simply the closing balances from the previous period carried forward. When setting up a new accounting system (like migrating to Xero), you need to enter opening balances manually based on your last set of financial statements. This includes all asset balances (bank accounts, receivables, inventory, fixed assets), liability balances (payables, loans, tax owing), equity balances and any year-to-date revenue and expenses. Getting opening balances right is critical because errors will flow through to all subsequent financial reports. The balance sheet equation must balance in your opening entries. SortBooks works with whatever opening balances are set in Xero, using historical transaction patterns to begin categorising new transactions accurately from day one.
SortBooks helps with the bookkeeping behind opening balance by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing opening balance by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
The balance sheet is a financial statement that shows your business's assets, liabilities and equity at a specific point in time. It follows the equation: Assets = Liabilities + Equity.
Closing the books is the process of finalising all accounting entries for a period and preparing the accounts for the next period. It includes reconciliation, adjustments and report generation.
The general ledger is the master record of all financial transactions in a business, organised by account. It forms the basis for preparing financial statements.
The financial year (or fiscal year) is the 12-month period your business uses for accounting and tax reporting purposes. It may or may not align with the calendar year.
The chart of accounts is a structured list of all accounts used in your accounting system to categorise transactions. It defines the categories for your income, expenses, assets, liabilities and equity.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.