Balancing Accounts (Cambridge International IGCSE Accounting)

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

Exam Hint Make sure you know how many days there are in each month.

Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
31	28 or 29	31	30	31	30	31	31	30	31	30	31

Example of balancing a trade receivable account

Worked Example Milo is a sole trader. Milo buys goods on credit from SME Goods. The transactions during February 2024 are shown below in the SME Goods account in the purchases ledger. Balance the account on 29 February 2024.

SME Goods Account

Date	Details	$**	Date	Details	$
2024 Feb 1	Balance b/d	200	2024 Feb 2	Purchases	800
Feb 8	Purchases returns	100	Feb 19	Purchases	1 500
Feb 16	Bank	650	Feb 27	Purchases	700
Feb 16	Discount received	50
Feb 29	Bank	800

Answer:

• The total of the debit entries is $1800 The total of the credit entries is $3000

• The difference is $1200

  • This goes on the debit side as that side has a smaller total

SME Goods Account

Date	Details	$	Date	Details	**$
2024 Feb 1	Balance b/d	200	2024 Feb 2	Purchases	800
Feb 8	Purchases returns	100	Feb 19	Purchases	1 500
Feb 16	Bank	650	Feb 27	Purchases	700
Feb 16	Discount received	50
Feb 28	Bank	800
Final answer: Feb 29	Final answer: Balance c/d	Final answer: 1 200
		Final answer: 3 000			Final answer: 3 000
			Final answer: Mar 1	Final answer: Balance b/d	Final answer: 1 200