What is A Ledger Balance?

In the previous articles we discussed about the Ledger in Principles of Accounting, which is an important step of "Steps in the Accounting Cycle". If you don’t read this one then kindly read so that you better know about this term.

Here we discuss about What Does Ledger Balance Mean.

There are two kinds of balances in the accounts of sole proprietorship, partnership or company businesses:

Ø Debit

Ø Credit

Ø Debit Balance

It means Debit side is higher than Credit side and hence to equalize both sides, the difference between Debit and Credit side is shown on the Credit side. For Example, Cash Ledger has opening balance of Rs.80000, Cash received from Customers is Rs.50000. On the credit side Rs.30000 is paid to Suppliers. As the Debit side is greater than credit side and credit side is shortage of Rs.90000 and to equalize total debits and total credits, a value of Rs.90000 is shown on the credit side and that is the ending balance of Cash account to be carried forward to Balance Sheet.

This Article is Also Helpful, "What Is The Difference Between Debit And Credit"

Cash Account

Date January 2016	Particulars	J.R	Amount Rs.	Date January 2016	Particulars	J.R	Amount Rs.
3	Cash		80000	1	Accounts Payable		30000
3	Mr. A		50000	31	Balance c/d		90000

Ø Credit Balance

When Credit Side exceeds the Debit side of a Ledger, then there is shortage on the debit side and to fill this shortage and a value is shown on the debit side to equalize the both sides. For Example, Cash sales of Rs.120000 are made during the year. A sales return is also made from our customer (Mr. A) for Rs.20000. Hence, there is shortage of Rs.100000 on the debit side and to equalize the total debits and total credits, the amount of Rs.100000 is shown on the debit side to equalize the both sides of Sales Ledger. This shortage is the ending balance that is left out during the current year and transferred to Income Statement.

You may also interested in IncomeStatement and Balance Sheet Example.

Sales Account

Date January 2016	Particulars	J.R	Amount Rs.	Date January 2016	Particulars	J.R	Amount Rs.
3	Mr. A		20000	1	Cash a/c		120000
31	Balance c/d		100000

This is all about “What is a Ledger Balance” or What Does Ledger Balance Mean. Now, hopefully, you will be able to better understand this topic.