This article explains how to enter your opening balances as part of FreeAgent's account setup process if you have a limited company or limited liability partnership (LLP) FreeAgent account type.
If your business has been trading for a while, you'll have some opening balances to enter when you first begin using FreeAgent. These are your figures as they stood as at your FreeAgent start date. FreeAgent needs to include this brought forward information in your accounting reports.
If you have a sole trader or partnership FreeAgent account, find out how to enter your opening balances depending on if your business prepares its accounts using the accruals accounting basis or cash basis.
Which opening balances do you need to enter?
If you’re starting to use FreeAgent at the beginning of a new accounting year, you only need to put in balances for your balance sheet accounts, such as money owed to you by your customers. Accounts with numbers 600 to 999 on a trial balance in FreeAgent are balance sheet accounts.
However, if you’re starting to use FreeAgent mid-way through your accounting year, you may also have entries for the year to date for your profit and loss accounts, such as income the business has earned since the beginning of this accounting year. Accounts with numbers 001 to 599 on a trial balance in FreeAgent are profit and loss accounts.
If you’re moving to FreeAgent from another software package, you should be able to generate a report to view your trial balance as at your FreeAgent start date. For advice on extracting data from other software packages, please refer to that software provider.
Your accountant should be able to supply you with a trial balance (a list of all the balances in your accounts) as at your FreeAgent start date and will be able to advise which entries you need to record in your FreeAgent account. Please note that our support team can’t help you with this as we’re not authorised by HMRC to provide accounting advice.
You can export a chart of accounts to find a full list of the categories available in your FreeAgent account and add new categories if you need to.
If your business is VAT registered, we recommend you enter the opening balances before you file your first VAT return as once that VAT return is filed, you won’t be able to edit entries to accounts ‘818 - VAT Reclaimed’ or ‘819 - VAT Charged’. These categories are used to populate your first VAT return in FreeAgent, if you start using FreeAgent mid VAT quarter.
What might your opening balances include?
Your opening balances as at your FreeAgent start date may include some or all of the following:
- money your customers owe you (your accountant might call this ‘trade debtors’)
- money you owe to your suppliers (your accountant might call this ‘trade creditors’)
- the balance(s) on your bank account(s)
- money you owe to HMRC for PAYE and NIC, or VAT
- opening share capital
- reserves of retained profits or losses your business has built up over the years
- the balance(s) on outstanding loans
How to enter your opening balances
You can either import your opening balances into FreeAgent or enter them manually by following the steps below.
You can add opening balances for bank accounts and stock items first, and then enter the rest of your opening balances using journal entries.
Adding bank account balances
To enter your bank account balances, navigate to the ‘Banking’ tab at the top of the screen, select ‘Bank Accounts’ from the drop-down menu and select the relevant bank account from the list. From the bank account page, select ‘Edit Details’ at the top-right and enter the balance as at your FreeAgent start date. Enter a minus sign in front of the number if the balance is money you owed to the bank, such as an overdraft or loan.
You may have entered the opening bank balance when you set up your account, but we recommend that you check that the figure is correct.
Adding stock balances
If you had items in stock as at your FreeAgent start date, create new stock items and enter the opening quantity and value of those items.
Completing your opening balances using journal entries
You’ll need to record the rest of your opening balances as a set of journal entries.
Navigate to the ‘Accounting’ tab at top of the screen and select ‘Journal Entries’ from the drop-down menu.
From the 'Journal Entries' screen, choose 'Opening Balances' from the drop-down menu.
You’ll see that there is already a set of opening balance journals created. To import your opening balances from a .CSV file, select ‘Import Opening Balances’.
Alternatively, to add more opening balances, select ‘Edit Opening Balances’. This may include opening VAT, share capital, profit or loss reserves and loan balances.
Enter each opening balance as a debit or credit to the relevant category. If you’re unsure which opening balances you need to enter, please ask your accountant.
The debit and credit balances of the opening balances should be equal if you’re entering them fully.
If these balances don’t match, there may be an opening balance(s) missing and the value of the difference will be displayed in red below the balances. If you’re not sure which entries are required, please ask your accountant.
Once the debit and credit balances are equal and you’re happy with the opening balances, select ‘Save Changes’ to complete the process.
If you enter your opening balances with a difference between the debit and credit values, FreeAgent will automatically create a suspense account as a balancing entry for the amount of the difference.
To correct this, edit your opening balances and enter the missing opening balance(s). Once the debit and credit balances are equal, FreeAgent will remove the suspense account.
VAT opening balances
The balances you enter will depend on a few scenarios - for example whether the first VAT quarter in FreeAgent is a new one or if you’ve started using FreeAgent mid-quarter, and whether or not you’re on the VAT Flat Rate Scheme. Follow the guidance in the relevant article below:
- Starting VAT figure: new quarter
- Starting VAT figure: mid-quarter (flat rate scheme)
- Starting VAT figure: mid-quarter (not flat rate scheme)
Adding opening share capital (limited companies only)
If your business is a limited company, you should enter the opening share capital for each shareholder as a credit to account code ‘901 - Capital Account’.
If any of the share capital was unpaid as at your FreeAgent start date, you are likely to also have a debit entry to account code ‘910 - Unpaid Shares’.
Adding opening profit or loss reserves
Any reserves of retained profits your business has built up over the years need to go in as a credit to account code ‘968 - Profit and Loss’. If the business is carrying a reserve of losses in its accounts as at its FreeAgent start date, that would be entered as a debit entry to account code ‘968 - Profit and Loss’.
If you have a limited company and need to enter a brought-forward loss for tax purposes, find out how to enter brought forward tax figures in FreeAgent.
Adding loan balances
If you’ve received a bank loan or are paying off a hire purchase loan, add a new liability category and enter the outstanding balance as it stood at your FreeAgent start date as a credit to that category. Find out more about how to deal with a loan from a bank or government scheme, or from an individual.
If you’ve provided a business loan to another business or an employee, add a new asset category and enter the outstanding balance as it stood at your FreeAgent start date as a debit to that category. Find out more about how to deal with a loan provided to a business or employee.
Editing your opening balances
If you need to make any changes to your opening balances, find out how to edit your opening balances.