Opening Balances in Tally
Enter all opening balances for Sunrise Retail in Tally, verify the Trial Balance shows zero difference, and view the opening Balance Sheet
Prerequisites: Module 23 — Manufacturing Journal and BOM
Learning Objectives
By the end of this module, you will be able to:
- Explain what opening balances are and when they need to be entered
- Enter all opening balances correctly in Tally
- Verify that the Trial Balance shows zero difference
- View and interpret the opening Balance Sheet in Tally
What Are Opening Balances?
Every business that switches from manual books to Tally (or starts a new financial year in Tally) needs to enter opening balances — the starting position of all accounts on Day 1.
Opening balances come from the last balance sheet (for an existing business) or the initial setup (for a new business).
When Are Opening Balances Needed?
| Situation | What to Enter |
|---|---|
| New business starting April 1 | Initial capital, initial stock, initial bank balance |
| Switching from manual to Tally mid-year | All account balances as on the switch date |
| New financial year | Closing balances of previous year automatically carry forward in Tally |
| New company created in Tally | All balances from physical balance sheet |
The Critical Rule: Balance Sheet Must Balance
After entering all opening balances, the Trial Balance must show zero difference (Total Debits = Total Credits). If there's any difference, something was entered wrong — either an amount, a Dr/Cr direction, or a missing entry.
How Tally shows this:
At the bottom of the Trial Balance, Tally shows:
If the difference is non-zero, Tally creates a "Suspense A/c" entry for the difference — a warning that your opening entries are incomplete.
Methods to Enter Opening Balances in Tally
Method 1: Directly in Ledger Masters When creating each ledger, enter the opening balance in the "Opening Balance" field.
- Simple, direct
- Best when setting up a new company from scratch
Method 2: Gateway → Opening Balance entry screen
Shows all ledgers in a grid — you can enter all balances in one screen.
- Efficient when updating multiple balances at once
Method 3: Journal Voucher on opening date Record a single opening Journal Voucher that debits all assets and credits all liabilities + capital.
- Good for learning/understanding
- Creates a visible "opening entry" in the Day Book
Sunrise Retail — Case Study Application
Opening Balance Sheet (April 1, 2025)
From the company profile:
Assets (Debit Balances):
| Account | Amount (Dr) |
|---|---|
| Cash in Hand | ₹50,000 |
| SBI Current Account | ₹8,00,000 |
| Opening Stock (Samsung Mobile Phones — 50 Nos @ ₹12,000) | ₹6,00,000 |
| Furniture & Fixtures | ₹1,50,000 |
| Computer & Equipment | ₹80,000 |
| Security Deposit — Office | ₹2,00,000 |
| Total Assets | ₹18,80,000 |
Liabilities & Capital (Credit Balances):
| Account | Amount (Cr) |
|---|---|
| TechWorld Distributors Pvt Ltd | ₹1,80,000 |
| Kiran Sharma — Capital | ₹17,00,000 |
| Total Liabilities + Capital | ₹18,80,000 |
Check: ₹18,80,000 = ₹18,80,000 ✓
Step-by-Step Entry in Tally
Method 1: Via Ledger Masters (Recommended)
1. Cash in Hand
2. SBI Current Account
3. Furniture & Fixtures
4. Computer & Equipment
5. Security Deposit — Office
6. TechWorld Distributors Pvt Ltd
7. Kiran Sharma — Capital
Opening Stock — Via Stock Item Master
8. Samsung Mobile Phones (Opening Inventory)
Note: In Accounts with Inventory, stock opening balance goes in the Stock Item master — not in an "Opening Stock" ledger. Tally carries the stock value to the Balance Sheet automatically via the Stock-in-Hand group.
Verification: Trial Balance on April 1, 2025
| Account | Dr (₹) | Cr (₹) |
|---|---|---|
| Cash in Hand | 50,000 | |
| SBI Current Account | 8,00,000 | |
| Furniture & Fixtures | 1,50,000 | |
| Computer & Equipment | 80,000 | |
| Security Deposit — Office | 2,00,000 | |
| Samsung Mobile Phones (Stock) | 6,00,000 | |
| TechWorld Distributors Pvt Ltd | 1,80,000 | |
| Kiran Sharma — Capital | 17,00,000 | |
| Total | 18,80,000 | 18,80,000 |
| Difference | ₹0 |
Difference = ₹0 ✓ Opening balances are correctly entered.
Balance Sheet on April 1, 2025
Liabilities:
| Account | Amount |
|---|---|
| Capital Account | ₹17,00,000 |
| Kiran Sharma — Capital | ₹17,00,000 |
| Current Liabilities | |
| TechWorld Distributors | ₹1,80,000 |
| Total | ₹18,80,000 |
Assets:
| Account | Amount |
|---|---|
| Fixed Assets | |
| Furniture & Fixtures | ₹1,50,000 |
| Computer & Equipment | ₹80,000 |
| Current Assets | |
| SBI Current Account | ₹8,00,000 |
| Cash in Hand | ₹50,000 |
| Stock-in-Hand | ₹6,00,000 |
| Deposits (Asset) | |
| Security Deposit — Office | ₹2,00,000 |
| Total | ₹18,80,000 |
Both sides balance at ₹18,80,000. The company is ready to record April transactions.
Common Opening Balance Mistakes
| Mistake | Effect | Fix |
|---|---|---|
| Entering asset as Cr instead of Dr | Balance Sheet shows negative asset | Re-enter as Dr |
| Entering liability as Dr instead of Cr | Capital/Creditor shows negative | Re-enter as Cr |
| Missing a ledger | Suspense A/c created for the difference | Add the missing ledger and amount |
| Wrong amount | Difference in Trial Balance | Alter the ledger's opening balance |
| Stock entered in "Opening Stock" ledger instead of stock item | Stock item shows 0, P&L shows opening stock as expense | Delete ledger entry; enter in stock item master |
Opening Balances for New Financial Year
In Tally, when you move from one financial year to the next, closing balances automatically become opening balances for the new year. You don't manually carry them forward.
Tally creates a new year's data file and carries:
- All asset/liability closing balances → New year's opening
- Capital + Profit/Loss balance → Opening capital + retained earnings
- Stock closing balance → New year's opening stock
Nominal accounts (income/expenses) reset to zero — they belong to one year only.
Practice Exercise
Exercise 1: A new business "Lakshmi Mobile Shop" starts on April 1, 2025 with:
- Cash: ₹75,000
- SBI Bank: ₹3,00,000
- Stock of 20 phones @ ₹10,500 each
- Supplier outstanding: ₹50,000 to MobileWorld
- Capital: ?
Calculate the capital amount and list all opening balance entries for Tally.
Show answer
Stock value: 20 × ₹10,500 = ₹2,10,000
Capital (Assets − Liabilities): Assets: ₹75,000 + ₹3,00,000 + ₹2,10,000 = ₹5,85,000 Liabilities: ₹50,000 (MobileWorld) Capital = ₹5,85,000 − ₹50,000 = ₹5,35,000
Opening Balance Entries in Tally:
| Ledger | Dr/Cr | Amount |
|---|---|---|
| Cash in Hand | Dr | ₹75,000 |
| SBI Current Account | Dr | ₹3,00,000 |
| MobileWorld (Creditor) | Cr | ₹50,000 |
| Lakshmi — Capital | Cr | ₹5,35,000 |
Stock Item: Phone Model X | 20 Nos @ ₹10,500 = ₹2,10,000
Trial Balance verification: Dr: ₹75,000 + ₹3,00,000 + ₹2,10,000 = ₹5,85,000 Cr: ₹50,000 + ₹5,35,000 = ₹5,85,000 Difference: ₹0 ✓
Exercise 2: After entering Sunrise Retail's opening balances, the Tally Trial Balance shows:
- Total Dr: ₹18,80,000
- Total Cr: ₹18,60,000
- Difference: ₹20,000
What are two possible reasons for this ₹20,000 difference, and how would you identify the error?
Show answer
Two possible reasons:
-
A ₹20,000 asset was entered as a credit instead of a debit: For example, Security Deposit ₹2,00,000 was accidentally entered as ₹1,80,000 Dr (missing ₹20,000). Or a ledger balance was entered on the wrong side.
-
A ₹20,000 liability was not entered at all: If there's a creditor or loan not yet set up in Tally, the credit side would be understated by that amount.
How to identify:
- Compare each Tally ledger balance with the physical balance sheet — go line by line.
- Look at the Suspense A/c that Tally would have auto-created for ₹20,000.
- In Tally: Gateway → Masters → Accounts → Ledgers → Opening Balances → review the grid for any obvious mismatch.
- Check the accounting equation: ₹20,000 Dr > Cr means either an asset is overstated by ₹20,000, or a liability is understated by ₹20,000.
Most likely culprit: a ledger was entered at the wrong amount or with the wrong Dr/Cr.
Key Terms
| Term | Meaning |
|---|---|
| Opening Balance | The amount in an account at the beginning of a period — starting point |
| Trial Balance | List of all account balances to verify Total Dr = Total Cr |
| Suspense Account | Tally creates this automatically when opening balances don't match |
| Carry Forward | Tally automatically moves closing balances to next year's opening |
| Books Beginning From | The date from which Tally starts recording — set during company creation |
| Zero Difference | The target state of a Trial Balance — debits and credits are equal |
Module Summary
- Opening balances are the starting position of all accounts on Day 1 (April 1, 2025)
- Enter in ledger masters directly, or via the Opening Balances grid, or as a Journal Voucher
- Stock opening balances go into the Stock Item master (not a ledger) when using Accounts with Inventory
- Trial Balance must show zero difference — if not, find and fix the error before recording any transactions
- Sunrise Retail's opening Trial Balance: Total Dr = Total Cr = ₹18,80,000 | Difference = ₹0
- For new financial years, Tally automatically carries forward balances — no manual opening entry needed
Quick Quiz
- After entering all opening balances, the Trial Balance should show:
- a) Total Dr > Total Cr (assets exceed liabilities)
- b) Total Cr > Total Dr (profit is positive)
- c) Total Dr = Total Cr — Difference = ₹0
- d) Any difference is acceptable as long as it is small
Show answer
Answer: c — The Trial Balance must balance perfectly (zero difference) after opening entries. Any non-zero difference means an entry was missed, duplicated, or entered on the wrong side. Never proceed with transactions until this is resolved.
- Sunrise Retail's opening stock of 50 phones @ ₹12,000 is entered in:
- a) The "Opening Stock" ledger as a Debit
- b) The Samsung Mobile Phones Stock Item master
- c) The Purchase A/c as an opening balance
- d) A Journal Voucher dated April 1
Show answer
Answer: b — In Tally's Accounts with Inventory mode, stock items carry their own quantity and value. The opening stock goes into the Stock Item master (Inventory → Stock Items → Alter → Opening Balance). Tally automatically reflects this in the Balance Sheet under Stock-in-Hand.
- TechWorld Distributors' opening balance of ₹1,80,000 is entered as:
- a) Debit — they are an asset
- b) Credit — they are a creditor (liability)
- c) Either — depends on the voucher type
- d) Not entered — creditor balances are entered only when invoices are raised
Show answer
Answer: b — TechWorld is a supplier we owe money to — a creditor / Sundry Creditor. Creditors are liabilities, shown on the Credit side. The ₹1,80,000 represents an amount Sunrise Retail owes TechWorld from a previous purchase.
- If the Trial Balance shows a Difference of ₹50,000 Dr, it means:
- a) The company made ₹50,000 profit
- b) A liability was understated by ₹50,000 OR an asset was overstated by ₹50,000
- c) Everything is fine — Dr surplus is normal
- d) The software has a bug — ignore it
Show answer
Answer: b — Debit excess (Dr > Cr) means the asset/debit side is inflated relative to the liability/credit side. Either an asset was entered at a higher amount than it should be, or a liability was entered at a lower amount (or missed entirely).
Next up: Module 25 — Final Accounts — Prepare Sunrise Retail's April 2025 Trading Account, P&L, and Balance Sheet — and learn how to read the key financial ratios.