Execution

The opening balance is executed in three phases. This breakdown helps in managing and controlling each phase separately. The first phase represents the fixed assets opening balance acquisition and depreciation, the second phase represents the inventory opening balance, and the third phase represents the trial balance opening balances, which consists of accounts payable, and receivable, banks, and non-posting profile accounts:

 

Before starting the execution of the opening balance, the implementation team should ensure the foundation is done properly; in the next section, we will cover the required foundations of the opening balance:

• Carry out the master data upload of the COA, financial dimensions, vendors, customer, banks, fixed assets and inventory items, in addition to inventory dimensions, and warehouses
• Completely configure the account structure, and advanced rules if required
• Set up the accounting currency, and reporting currency
• Set up currencies, and the used exchange rate for the opening balance
• Set up the posting profiles for the sub-ledgers (accounts payable, accounts receivable, banks, fixed assets and inventory)

Related to the foundation, a bridge account will be needed that is used in the fixed asset, and inventory opening balance entry. The bridge account is used to balance the posted entries of assets, and inventory; the balance of the bridge account is temporary till it is reversed in the trial balance posting. In other words, the use of a bridge account is to keep the double entry basis of posting assets, and inventory transactions.

In the following section, we will illustrate the high level of execution mechanisms from the accounting entries perspective for the three phases. The fixed asset phase is divided into two separate tasks:

• The first task is posting the asset acquisition
• The second task is posting the fixed asset depreciation

The posted opening balance of the fixed asset account is generated directly from the fixed asset submodule, and the acquisition entry is balanced by the bridge account (this amount will be reversed when posting the trial balance entry). The posted opening balance of the accumulated depreciation account is generated directly from the fixed asset submodule, and the depreciation entry is balanced by the bridge account (this amount will be reversed when posting the trial balance entry).

In the inventory opening balance, the posted opening balance of the inventory account is generated directly from the inventory submodule, and the movement entry is balanced by the bridge account (this amount will be reversed when posting the trial balance entry).

The third phase covers the posting of the opening balance of accounts payable, accounts receivable, banks, and the rest of the accounts (non-posting profile accounts) in addition to the reversal of the bridge account balances, which are generated from the fixed asset and inventory phase. The concept of the opening balance posting is to ensure that the balance sheet accounts that represent submodules should be posted from the submodule. The following diagram illustrates the posting of bridge accounts from submodules, and these bridge accounts are reversed in the trial balance, in addition to the posting of which represents submodules: