Balancing the Accounts

Balancing the Accounts

At the end of an accounting period — typically a month, quarter, or year — every ledger account is balanced. The purpose is to find out the net position of that account: how much is owed to a creditor, how much is due from a debtor, what the balance of cash or bank is, and so on.

Balancing an account means totalling both the debit side and the credit side, finding the difference between them, and inserting that difference on the shorter side so that both sides become equal. The amount of the difference is written on the shorter side with the words “Balance c/d” (carried down). This balance is then brought down to the next period as “Balance b/d” (brought down), showing that the account continues until it is finally settled or closed.

If the debit side total exceeds the credit side total, the difference is written on the credit side — that is a debit balance. If the credit side total exceeds the debit side total, the difference is written on the debit side — that is a credit balance.

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Illustration: Complete Process from Journal to Balanced Ledger

The textbook provides a full set of transactions for April 2017. The steps are:

1. Record transactions in the subsidiary books (Purchases Book, Sales Book, Purchases Return Book, Sales Return Book, Journal Proper, Cash Book).
2. Post each entry to the relevant ledger account.
3. Balance each ledger account at the end of the month.

Below are the balanced ledger accounts as they appear after posting. Each account is shown in the standard T-format (Dr. on the left, Cr. on the right).

Capital Account

6% Loan Account

Ramneek’s Account

Ramneek’s account is fully settled — no balance is carried forward.

Sales Account

Sales is a revenue account — it is not balanced. It will be closed by transfer to the Trading Account.

Furniture Account

Land Account

Purchases Account

Purchases is an expense account — it is not balanced. It will be closed by transfer to the Trading Account.

Stationery Account

Stationery is an expense — closed to P&L.

Miscellaneous Expenses Account

Rent Account

Advertisement Account

Electric Charges Account

Drawings Account

Telephone Charges Account

Insurance Account

Quality Furniture Account

Mohit Mart Account

Purchases Return Account

Purchases Return is a gain — closed to P&L.

Handa Company Account

Burari Ltd. Account

Kochhar Account

Sales Return Account

Sales Return is a loss — closed to P&L.

Kapadia Account

Daman Account

| Date | Particulars | J.F. | Amount (₹) | Date | Particulars | J.F. | Amount (₹) | …