Question -
Answer -
The accounts in the ledger are balanced at periodic intervals of daily, weekly, fortnightly, monthly, quarterly or any other pre-defined periodic intervals. The goal of balancing is to determine the net position of each amount. The following steps are involved in the balance of the accounts.
- The debit and credit side are totalled.
- The total on the side which is higher is written on the corresponding side.
- The difference between both the sides is recorded on the shorter side. This makes the total on both the sides equal.
- In case the debit side exceeds the credit side, the difference is written on the credit side. This is called Debit Balance.
- If the credit side exceeds the debit sided, the difference is written on the debit side. This is called Credit Balance.
- The words balance c/d are written against the amount of the difference between the two sides. Balance c/d stands for balance carried down.
- The amount of balance is brought down (b/d) in the next accounting period. It is denoted with Balance b/d. This indicates that it is a continuing account, till finally settled or closed. Here Balance b/d stands for Balance Brought Down.
- The accounts of expenses losses and gains/revenues are not balanced. Instead, these are transferred to trading and profit and loss account.