A closing balance is the amount in an account at the end of an accounting period. It is the figure carried forward to start the next period.
What it means
At period-end each account is totalled to its closing balance, often marked "carried forward". For balance-sheet accounts that figure rolls straight into the next period as the opening balance. Income and expense accounts are instead closed off to zero, their balances transferred to profit, so the new year starts fresh.
Where it fits in
Closing balances are what the financial statements report at the period-end date, and they are the link between consecutive periods - this period's closing balance is next period's opening balance. Closing the books each period produces them.
Key rules
- An account's balance at the end of a period.
- Carried forward as the next period's opening balance.
- Balance-sheet accounts roll forward; income and expense accounts close to zero.
- Reported by the financial statements at the period-end date.
