How do we work out the balance left on an account at the end of a period?
Balance off ledger accounts and bring down the balance, identifying it as a debit or credit balance
A simple answer to the N(A)-Level Principles of Accounts outcome on balancing accounts. How to total each side, insert the balance carried down, bring it down for the next period, and say whether it is a debit or credit balance.
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What this dot point is asking
SEAB wants you to balance off a ledger account: total both sides, find the difference, carry it down, bring it down, and say whether it is a debit or credit balance. This is how each account is closed at the period end and how the figures for the trial balance are produced. The central insight is that the balancing figure goes on the smaller side so the two totals match, then comes down on the opposite side to start the next period.
The answer
Why we balance off
Through a period an account fills with entries on both sides. To use it, we need a single closing figure, the balance. Balancing off finds that figure and makes the account ready for the next period.
The four steps
- Total each side (do this lightly, in pencil, or just work it out).
- Find the difference between the two totals. This is the balance.
- Insert the balance carried down () on the smaller side, so that both sides now add up to the same larger total. Rule off with the equal totals.
- Bring the balance down () on the opposite side, dated the first day of the next period.
Debit or credit balance
- If the debit side was larger, the balance is a debit balance (typical of assets and expenses, such as cash or rent).
- If the credit side was larger, the balance is a credit balance (typical of liabilities, income and capital, such as a supplier or capital).
The side the balance is brought down on tells you its type: brought down on the debit side means a debit balance.
Examples in context
Example 1. A receivable still owing. A customer's account shows a sale of \1,500\ on the credit side. Balancing off gives a debit balance of \600$ brought down, which is the amount the customer still owes, a receivable asset. The brought-down side (debit) confirms it is money owed to the business.
Example 2. Capital at the period end. The capital account is credited with the owner's contributions and debited with any drawings. Balancing off leaves a credit balance brought down, the owner's equity at the period end. The credit side tells us it is a credit balance, exactly what we expect for owner's equity.
Try this
Q1. An account has total debits of \3,500\. State the balance and its type. [2 marks]
- Cue. Balance = 3\,500 - 2\,000 = \1,500$, a debit balance (debits are larger).
Q2. On which side is the balance carried down placed if the credit side is larger? [1 mark]
- Cue. On the debit side, the smaller side, so the two totals match.
Q3. Explain how the side a balance is brought down on tells you whether it is a debit or credit balance. [2 marks]
- Cue. A balance brought down on the debit side is a debit balance; brought down on the credit side it is a credit balance, because b/d sits on the side that was originally larger.
Exam-style practice questions
Practice questions written in the style of SEAB exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Original5 marksBalance off a cash account with debits of \2\,000\ and credits of \700\. State the balance carried down, the balance brought down, and whether it is a debit or credit balance.Show worked answer →
Total debits = 2\,000 + 600 = \2,600= 700 + 500 = \.
Balance = 2\,600 - 1\,200 = \1,400\text{c/d}\, making both sides total \2,600$.
It is brought down () on the debit side as \1,400\ of cash held.
What markers reward: correct totals, the \1,400$ balance, c/d on the smaller (credit) side and b/d on the debit side, and identifying it as a debit balance.
Original5 marksA supplier's account has credits of \1\,800\ (payment). Balance it off and explain what the closing balance means.Show worked answer →
Total credits = \1,800= \.
Balance = 1\,800 - 1\,000 = \800\, making both sides total \1,800$.
It is brought down on the credit side as \800\ (a liability).
What markers reward: the \800$ balance with c/d on the debit side and b/d on the credit side, identifying it as a credit balance, and explaining it as an amount still owed to the supplier.
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