Balancing Ledger Accounts: Balancing of an account means the process of equalizing the two sides of an account by putting the difference on the side where amount is short. After Ledger Posting is completed the various accounts are balanced in order to know the exact position of a particular kind of transaction. Where the debit side of an account exceeds the credit side, the difference is put on the credit side, and the account is said to have a debit balance. This balance is brought down on the debit side while reopening the account. Similarly, where the credit side of an account exceeds the debit side, the difference is put on the debit side, and the account is said to have a credit balance. This is brought down on credit side while reopening the account. The following steps are followed for balancing the accounts:
Balancing Ledger Accounts
(i) Total the amounts of debit and credit entries in the account.
(ii) If the debit and credit sides are equal then there is no balance. The account stands automatically balanced or closed.
(iii) If the debit side total is more, put the difference on the credit side amount column, by writing the words in particulars column “By Balance c/d”. If the credit side total is more, put the difference on the debit side amount column by writing the words in the particulars column “To Balance c/d”.
(iv) After putting the difference in the appropriate side of the account, add both sides of the account and draw a thin line above and below the total.
(v) Bring down the debit balance on the debit side by writing the words in particulars column “To Balance b/d”. Similarly bring down the credit balance on the credit side by writing the words in the particulars column “By Balance b/d”.
Real Account Balance:
Real accounts relate to assets, when assets are purchased, the particular assets account debited, and when assets are sold or disposed off, the particular assets account is credited. So if an asset account has a balance it must be a debit balance. It indicates the value of asset in the possession of the business.
Personal account balance.
The debit balance of a personal account indicates debts owing by the person and credit balance indicates debts owing to the person concerned.For the business , the first is account receivable or asset while second is account payable.or liability. The debit balance of all personal accounts on a certain date put together will make ‘Sundry Debtors’ and the credit balance of all personal accounts ‘Sundry creditors‘. Sundry Debtors are asset and sundry Creditors are Liabilities. Where as Asset Accounts have debit balance liability accounts have Credit balance.
- Stages of Accounting
- Capital Losses and Revenue Losses
- Capital Receipts and Revenue Receipts
- Contingent Assets and Contingent Liabilities