Balancing Accounts

Balancing accounts

Balancing accounts

Why do businesses balance their accounts?

• Businesses balance their accounts at regular intervals

  • Usually at the end of a month

• Balancing accounts helps to:

  • Keep the accounts accurate

  • See the current balance of an account

  • Allow managers to monitor progress

How do I balance a ledger account?

• STEP 1
  Add up the entries on the debit side

• STEP 2
  Add up the entries on the credit side

• STEP 3
  Find the difference between the two totals

• STEP 4
  Put an entry with the difference on the side which has the smaller total

  • Put the date as the last day of that period

    • Usually the last day of the month

  • Call this entry balance c/d

    • c/d stands for carried down

• STEP 5
  Write the new totals on each side of the account

  • The totals should be in line with each other

  • Put a single line above the totals

  • Put a bold or double line underneath the totals

• STEP 6
  Put an entry of equal value to the balance c/d but on the other side after the totals

  • Put the date as the first day of the next period

    • Usually the first day of the month

  • Call this entry balance b/d

    • b/d stands for brought down

Example of balancing a trade receivable account