ZIMSEC O Level Principles of Accounts Notes: Balancing off the accounts
- Thus far we have only looked at how to record various transactions including:
- You might have noticed an entry that is listed as “Balance c/d” or “Balance b/d” in some of the examples
- This is known as balancing off the accounts
- It is done either at the end of every month, quarter, year or trading period depending on the business’s policies
Balancing off accounts
- Where an account has one entry on each side and the amounts are equal simply double underline the entries as shown in the example below
J Chimuti Account | ||||||
Date | Details | Amount($) | Date | Details | Amount($) | |
1 July | Sales | 300 | 5 October | Bank | 300 |
- Since the credit and debit side are equal in this case the account is considered balanced off
- If there are multiple transactions on both sides that are of equal amounts:
- Just add up the totals on both sides and place them in the same row on both sides beneath the amounts
- Double underline these totals as shown in the example below
J Chimuti Account | ||||||
Date | Details | Amount($) | Date | Details | Amount($) | |
1 November | Bank | 700 | 5 October | Purchases | 1000 | |
13 December | Cash | 500 | 11 November | Purchases | 450 | |
13 December | Discount | 200 | ||||
28 December | Cash | 50 | ||||
1450 | 1450 |
- Since both sides are equal the account is considered balanced
- If an account only has one entry then on the last day of the month,year or trading period:
- We insert the balancing figure on the opposite side
- The details on that side should Balance c/d
- This is short for Balance carried down
- On the first day of the next month or period the figure is entered as Balance b/d on the opposite side of the previous entry
- Consider the example shown below:
Motor Vehicle Account | ||||||
Date | Details | Amount($) | Date | Details | Amount($) | |
2016 | ||||||
5 January | Bank | 3000 | 31 December | Balance c/d | 3000 |
|
2017 | ||||||
1 January | Balance b/d | 3000 |
- Finally if an account has multiple entries on both side:
- First find out which side has a larger amount
- Subtract the total of the smaller side from the total of the larger side
- Insert the difference with the narration Balance c/d on the smaller side
- Add the totals of both sides, which should now be equal, and double underline them
- On the first day of the next period bring down the Balance c/d on the opposite side
- Consider the following illustration:
Motor Vehicle Account | ||||||
Date | Details | Amount($) | Date | Details | Amount($) | |
2016 | ||||||
5 January | Bank | 3000 | 31 December | Balance c/d | 4200 | |
12 August | Cash | 1200 | ||||
4200 | 4200 |
|||||
2017 | ||||||
1 January | Balance b/d | 4200 |
- These techniques are used when balancing off all accounts
- An account that has a debit side amount which is larger is said to have a debit balance
- An account whose credit side amount is larger is said to have a credit balance
- Accounts whose debit and credit side amounts are equal are said to have a zero balance
- At the end of the period these balances are extracted and form the basis of a Trial Balance
We have an example question and solution on balancing off accounts here
To access more topics go to the Principles of Accounts Notes.