This article explains how to enter your opening balances as part of FreeAgent's account setup process.
If you’ve 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 at your FreeAgent start date. We recommend you enter these before you file your first VAT return, because once that VAT return is filed, you won’t be able to edit entries to VAT reclaimed (818) or VAT Charged (819).
Your opening balances might include:
- money your customers owed you (your accountant might call this ‘trade debtors’)
- money you owed to your suppliers (your accountant might call this ‘trade creditors’)
- the balance(s) on your bank account(s)
- money you owed to HMRC for PAYE and NIC, or VAT
Where to find your opening balances
Your accountant should be able to supply you with a trial balance (a list of all the balances in your accounts) dated on the day before your FreeAgent start date.
If you’re starting to use FreeAgent at the beginning of a new financial year, you only need to put in balances for your balance sheet accounts, such as money owed to you by your customers.
If you’re starting to use FreeAgent mid-way through your financial 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 financial year.
Your accountant will be able to advise which entries you need to record in FreeAgent. Unfortunately we can’t help you with this as we’re not authorised by HMRC to provide accounting advice.
How to enter your opening balances
First, enter the opening balances for your bank accounts and for any stock you held as at your FreeAgent start date.
VAT opening balances
The balances you enter will depend on a few scenarios, like whether the first VAT quarter in FreeAgent is a new one or mid-quarter, and whether or not you’re on the Flat Rate Scheme.
Bank account balances
Enter your bank account balances by navigating to Banking, selecting the relevant bank account’s name under the graph, and then selecting ‘Edit Details’. Enter the balance as at your FreeAgent start date. Enter a minus sign if the balance is money you owed to the bank, such as an overdraft or loan.
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.
Opening share capital
If your business is a limited company, you should enter the opening share capital for each shareholder as a credit to code 901.
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 968. If the business is carrying a reserve of losses in its accounts as at its FreeAgent start date, that would be a debit entry to account 968.
Other opening balances
You’ll need to record the rest of your opening balances as a set of journal entries.
From the Journal Entries screen, choose 'Opening Balances'.
You’ll see that there is already a set of opening balance journals created. To add more opening balances to this, select ‘Edit Opening Balances’.
You can then enter rest of your opening balances here.
Editing your opening balances
You can easily edit your opening balances.
To edit your opening balances, navigate to Accounting > Journal Entries, choose Opening Balances and select ‘Edit Opening Balances’.
Make any changes you need to, then save them. Remember that the journal entries must balance in order to allow you to save them.
If you need to edit bank or stock balances, you can do that under Banking>Edit details or Settings>Price list>Stock rather than on the journal entry screen.
When you’ve filed a VAT return to HMRC through FreeAgent, you won't be able to edit the opening balance for VAT reclaimed (818) or VAT Charged (819), corrections for these need to be made in the next open VAT period.