Question

What do you understand by balancing of account?

Answer 1

Accounts are prepared on weekly, fortnightly, monthly, quarterly or on daily basis.

At the end of each period they are balanced.

The balancing of the accounts is done in the manner given below:

1. The totals of the debit and credit of an account is calculated, to ascertain which one of them is higher.

2. The higher figure among debit and credit side is written in the grand total cell on both sides of the account, i.e., in debit and in credit side.

3. The next step is to ascertain the difference between the debit total and the credit total. This difference is called ‘Closing Balance’ or ‘Balance carried down’, and is denoted by ‘Balance c/d’.

4. The ‘Balance c/d’ will be shown either in the debit or credit side, whichever totals up into lower amount.

5. If ‘Balance c/d’ is written in the debit side, then the balance is called ‘Credit balance’. On the other hand, if ‘Balance c/d’ is written in the credit side, then the balance is called ‘Debit Balance’.

6. On closing the account, ‘Balance c/d’ is brought forward to the subsequent period, and it is written as ‘Balance b/d’.

Usually, the closing balances of real and personal accounts are forwarded to the next period by this manner. For nominal accounts,

Steps 1 to 3 remain same and they are closed by transferring the closing balances either to Trading Account or to Profit and Loss Account.