Balancing General Ledger Accounts

Balancing an Account

The difference between total debits and the total credits of an account is balance. As shown above many accounts have entries on their debit as well as credit side. The net result of such debits and credits in an account is the balance.
The writing of the difference between the amount columns of the two sides in the lighter (smaller total) side, so that the grand totals of the two sides become equal is called balancing.
While balancing an account three things may happen depending upon the debit total and the credit total.

• It may be a debit balance or
• A credit balance or
• A nil balance

Debit balance results, when debit total is in excess of credit total. It is first recorded on credit side above the total and then entered on the debit side below the total as first item for next period. It is first recorded on the credit side, above the total. Then it is entered on the debit side, below the total, as the first item for the next period.

Dr		Cash Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Mar 1,2009	To Sales A/c		10000	Mar 5, 2009	By Purchase A/c		5000
Mar 10,2009	To Kumar's A/c		4000	Mar 19, 2009	By Salary A/c		4000
			Total : 14000	April 1, 2010	By Balance c/d		5000
	To Balance b/d		5000				Total : 14000

Conversely excess of credit total over the debit total is called the credit balance. It is first written in the debit side, as the last item, above the total. Then it is recorded on the credit side, below the total, as the first item for the next period.

Dr		Capital Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Mar 31,2009	To Balance c/d		100000	Apr 5, 2008	By Cash		100000
			Total : 100000				Total : 100000
				April 1, 2009	By Balance c/d		100000

Balancing is done periodically, i.e., weekly, monthly, quarterly, half-yearly, or yearly. i. Personal accounts are generally balanced regularly to know the amounts due to the persons (creditors) or due from the persons (debtors). Real accounts are balanced at the end of the financial year, when final accounts are being prepared. Cash account however is frequently balanced to know the cash on hand. Assets accounts always show debit balances and it is the value of the asset owned by business.

Nominal Accounts, not to be balanced as they are to be closed by transfer to final accounts. A debit balance in a nominal account indicates that it is an expense or loss. A credit balance in a nominal account indicates that it is an income or gain. Balances in personal and real accounts are shown in the Balance Sheet and the balances in nominal accounts are taken to the Profit and Loss Account.

Lets understand procedure to balance the accounts.

• Find difference between total amount of debit column and credit column.
• If the debit exceeds credit, enter this difference in the amount column of the credit side, alongwith date of balancing and words “By Balance c/d” (c/d means carried down) in the particulars column. If the credit exceeds the debit , enter this difference in the amount column of the debit side, alongwith date of balancing and words “To Balance c/d” in the particulars column.
• Sum up both the amount columns, and put the total on both the sides
• Enter the date of the beginning of the next period and bring down the debit balance on the debit side along with the words “To Balance b/d” (b/d means brought down) in the particulars column and the credit balance on the credit side along with the words “By balance b/d” in the particulars column.

In place of c/d and b/d, the words c/f or c/o (carried forward or carried over) and b/f or b/o (brought forward or brought over) may also be used.

When the balance is carried down in the same page, the words c/d and b/d are used, while balance is carried over to the next page, the term c/o and b/o are used. When balance is carried forward to some other page either in same book or some other book, the abbreviations c/f (carried forward) and b/f (brought forward) are used.

How would you balance following account in the ledger on March 31,2009?

Dr		Shrikant's Account					Cr
Date	Particulars	J.F	Amount	Date	Particulars	J.F	Amount
Mar 10,2009	To Sales A/c		100000	Mar 5, 2009	By Sales Return A/c		10000
Mar 10,2009	To Sales A/c		50000	Mar 19, 2009	By Cash A/c		25000
			Total : 150000	April 1, 2010	By Bank A/C		50000
	To Balance b/d		65000		By Balance c/d		65000
							Total : 165000

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