Enter Capital Opening Balance

Opening Day Balance Sheet – Capital

The opening day capital balance forms part of the opening balance sheet of the business. Capital represents cash or cash equivalents invested by the owners in the business, often referred to as a capital introduction.

The capital balance is recorded in the balance sheet of a business under its own heading of capital. Together with retained earnings, capital forms part of the owners equity in the business.

Capital Opening Balance in the Financial Projection

The capital included in the opening balance sheet is no different than any other capital, only the timing differs.

The opening balance is simply the balance that was there before the first day of the financial projection. Consequently if the capital is introduced after the first day it will show as new capital in the appropriate year. It is important to realize that opening capital is not included in both places as this results in double counting.

capital opening balance - extract from the financial projections template

The date on which the financial projection starts is entirely a matter of personal choice. Usually it is better to have the projection start date consistent with the start of a financial year.

Established Business Plan

For an established business, there will normally be a capital opening balance (assuming the business has raised finance before). The value of this opening balance can be found on the latest available balance sheet. The figure to use is the total of the amounts shown under the headings capital, share capital, stock, preference capital or any other capital related heading.

Startup Business Plan

For a startup business, we recommend the use of the startup costs calculator which produces an opening balance sheet for inclusion in the financial projections template.

The amount to use for the capital opening balance is the value shown under the calculator heading opening balance sheet. This is effectively the amount of capital the business has when it starts trading, and forms part of the startup funding together with the opening debt finance and accounts payable.

Having entered the beginning capital balance, the template calculates the capital at the end of each subsequent year by taking the beginning balance and adding any new capital raised during the year shown in the cash flow statement,

Closing capital balance = Opening capital balance + New capital

What’s the Next Step?

The next step in producing a five year financial projection for your business plan using our financial projections template, is to determine the days sales outstanding to be included in the projected balance sheets.

This is part of the How to Create Financial Projections Guide a series of posts on how our template is used to produce simple financial projections for a business plan.

Last modified November 3rd, 2022 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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