balance the accounts

Whenever you want to balance an account, you add the two sides, and if the totals of the two sides are unequal, the difference is put on the side that has the least total. This will make both sides equal. The amount of the inserted difference is known as the ‘balance’ of the account. In the details column it is written as Balance c/d (withdrawn). In the subsequent period it is known as a balance offer (down). If the total on the credit side of the account is less, the balance will be inserted on the credit side with the words “Per Balance c/d”. This balance is known as Debit Balance and after closing the account it will be displayed on the debit side with the words “To Balance bid”. Similarly, if the total on the debit side of the account is less, the balance will be inserted on the debit side with the words “To Balance c/d”. This balance is known as the Credit Balance and after the account is closed it will be displayed on the credit side with the words “Per Balance Offer”.

Personal accounts

It’s worth refreshing your memory and remember that personal accounts relate to individuals and business entities (business, company, corporation, etc.) and the rule is: the recipient must be debited and the giver must be credited. Now, if on a particular date the company wants to know how much amount a particular person ‘owes’ or ‘owes’ to itself (company), then it must balance the account of the person in question. Debit balance according to personal account means that the person is the company’s debtor, that is, the person owes an amount equal to the company’s balance or the amount, represented by the balance, is ‘owed’ to the company by the person. Similarly, the personal account credit balance means that the person is the business creditor, i.e. the business owes an amount equal to the balance to the person or the amount represented by the balance is ‘owed by’ the business to person.

real account

They are the accounts related to goods or possessions or rights. The rule is: “What goes in is charged and what goes out is credited.” Therefore, all inputs must be recorded on the debit side and outputs on the credit side. On any particular date, these accounts must have a “debit balance” that represents the value of the item covered by the account. At the end of the year (usually) or at any other time when it is required to verify the financial situation of the company, these accounts are balanced. These balances are shown on the asset side of the statement of position or Balance Sheet. These accounts have a ‘debit balance’ which means the ‘book value’ or ‘write value’ or ‘going concern value’ of the company’s assets on that relevant date.

Nominal Accounts

These are the accounts that show the different items of expenses and sources of income. At the end of the specified period (usually one year), these accounts are closed by transfer to the final accounts, i.e. trading or profit and loss account.

Ledger Need

General ledger maintenance is imperative in all accounting systems. It is necessary as will be clear from its advantages:

(1) Transactions relating to a particular person, item or item of expense or income are grouped together in the account in question in one place.

(2) When each account balances periodically, it reflects the net position of that account. For example, how much does a customer owe or how much should be paid to a supplier or what is the value of total purchases or what has been the expense in salaries? Such information is available by balancing the general ledger accounts.

(3) The general ledger is the springboard for preparing the trial balance, which tests the arithmetic accuracy of the ledgers.

(4) Since journal entries are referenced in the general ledger, the possibility of errors or falsifications is minimized.

(5) The general ledger is the destination for all entries made in the journal or sub-journal.

(6) The general ledger is the “store” of all information that is subsequently used to prepare final financial statements and accounts.

Opening entry and its publication. In the case of an existing business, we are required to make a journal entry (based on the Balance Sheet prepared at the end of the previous year) to bring all assets and liabilities to the new books: this is known as an Opening entry.