Understanding Carry Forward: A Comprehensive Legal Definition
Definition & Meaning
Carry forward (CF) refers to the accounting process of transferring the closing balance of an account from one accounting period to the opening balance of the next period. This process ensures that financial records remain accurate and reflect the most current data. If a new transaction is added and no entry is made regarding the CF data item, the system will automatically use the most recent active record for that account.
Legal Use & context
Carry forward is commonly used in accounting practices, particularly in financial reporting and tax preparation. It is relevant in various legal contexts, including corporate law, tax law, and financial compliance. Users may encounter this term when managing their financial records or preparing tax returns, where accurate account balances are crucial. Legal templates from US Legal Forms can assist users in documenting these transactions properly.
Real-world examples
Here are a couple of examples of abatement:
For instance, a company finishes its fiscal year with a closing balance of $10,000 in its cash account. When the new fiscal year begins, this amount is carried forward to become the opening balance for that account. If no new transactions are recorded, this balance remains until new entries are made.
(Hypothetical example) A freelance graphic designer has a closing balance of $2,500 at the end of December. In January, this amount is carried forward as the opening balance for their accounting records.