What Is Balancing of Account

Account Balance Example / What Is Balance Amount / Accounting / Balance Brought Down Example / Balancing Off Accounts Example / Carried Down Brought Down Accounting Example / Balancing Ledger Accounts Example

Previously, we studied about “What is Ledger Balance At ATM” and ”What is A Ledger Balance” but here we will study to know the answer to the question about What is Balancing of Account or What is Account Balance in Accounting or How To Balance A Ledger?

What is the Difference Between Debit And Credit Balance And Why It Arises?

Or

How To Balance A Ledger?

Ledger Balance means that an account may have debit or credit balance. Debit Balance is shown on Right side of Ledger while Credit Balance is shown on Debit Side as both Debit and Credit Sides are not equal in monetary value. When we totaled Debit and Credit side of a Ledger for an account, then these sides may be greater than or less than with each other. So, Debit and Credit Balances arise because debit side may be greater than credit side or credit side is greater than debit side. When Debit side is more than Credit side, then we say it is a Debit Balance because Credit Side needs more amount to become balance with debit side. Similarly, if Credit side is greater than Debit side, then we can say that it is a Credit Balance as Debit side needs more amount to balance with Credit side.

Both Debit and Credit Balances have the Closing Balances or Ending Balances and these are transferred to Balance Sheet at the end of Accounting Period.

We know that there are 5 types / kinds of Accounts so Assets always have Debit Balance that is a Favourable Balance for assets while Liabilities and Equity always have Credit Balance which is a Favourable balance of Liabilities & Equity. Expenses and Revenues have no balances and closed to Income Statement as these are the profitable activities of owners of the business so Revenues - Expenses gives us Net Profit / Net Income or Net Loss for the Accounting Period.

Example: Mr. Started business with Cash Rs. 500000. He made Additional purchases for Rs. 300000. He withdraw Cash Rs. 100000 from his personal use, then Cash Balance at the end of Accounting Period is shown in the below Cash Book:

Mr. A (Sole Trader)

Cash Book

For the Month, September, 2018

                      Rs.                                                                                             Rs.

Cash          500000                                                        Purchases              300000

Drawings   100000

                                                                               Closing Balance c/d      100000

Total of Debit side is Rs. 500000, while total of Credit side is Rs. 400000, As debit side is greater than Credit side, so is a debit balance as Credit side needs Rs. 100000 to become balance or equal with Debit Side. The difference between Debit and Credit Side is Rs. 100000. Hence Ending Balance of Cash at the end of Accounting Period is Rs. 100000 and it is transferred to Balance Sheet as a Current Asset under Assets side.

You May Also Be Find This Article Useful,"What is the Difference Between Debit And Credit"

So, we can say that Debit Balance shows that Debit Side is heavy than Credit Side while Credit Balance indicates that Credit side is greater than Debit Side.