Balancing a Ledger Account

At the end of a period (a month, or the accounting year), every account whose balance needs to be carried forward is balanced — the two sides are totalled, the difference between them is found, and that difference is entered so that both sides show the same total.

Steps in balancing an account

1. Total each side of the account separately (in small pencil-total figures, not yet written in ink).
2. Find the difference between the two totals.
3. Enter that difference on the SIDE WITH THE SMALLER TOTAL, with the words "To Balance c/d" (if entered on the debit side) or "By Balance c/d" (if entered on the credit side). c/d stands for carried down.
4. Both sides now add up to the same total — write this common total on both sides, in one line, ruled off above and below.
5. Bring the balance down to the OPPOSITE side, on the first date of the next period, with the words "By Balance b/d" (if the account has a debit balance) or "To Balance b/d" (if the account has a credit balance). b/d stands for brought down, and this becomes the OPENING balance of the account for the next period.

Which accounts are carried forward, and which are not. Personal accounts (a debtor's or creditor's account, the Capital account) and Real accounts (asset accounts such as Cash, Furniture, Stock) ARE balanced this way, and their balance b/d becomes the opening balance for the next period — this is exactly what eventually appears in the Balance Sheet. Nominal accounts (expense and income accounts, such as Purchases, Sales, Rent, Salaries), by contrast, are not carried forward from one accounting YEAR to the next in this way — at the end of the accounting year their balances are transferred (closed) to the Trading Account or the Profit and Loss Account, since an expense or income belongs entirely to the period it was incurred or earned in. Within a shorter period such as a single month, a nominal account is simply totalled to see its running figure; it does not carry a "balance b/d" into the next month the way a personal or real account does.

Illustration (continued) — posting and balancing the full set of accounts. The ten transactions of Mr. Ajay journalised in the previous section are posted and balanced below.

Cash Account

Capital Account

Ravi's Account (Debtor)

Suresh's Account (Creditor)

Furniture Account

Purchases Account (Nominal — total for the month; not carried forward as an opening balance, closed to the Trading Account at year-end)

Sales Account (Nominal — total for the month; not carried forward, closed to the Trading Account at year-end)

Rent Account and Salaries Account (Nominal) …