How Do We Balance the Account?
On any day, week, month or year accounts can be balanced to see whether any particular account is in credit or debt. To do this we look at which side is larger than the other. In the case of the account of Sharp Ltd, we can see that on the left hand side there are total transactions of £750.00 and on the right the lower amount of £500.00 for the period May 1st to June 30th. To balance off the account, however, both sides must be made to balance, however. To do this the difference between the higher and lower figure is added to the column with the lower total. In this case £250.00 must be added to the right hand column. The figure is entered against "balance carried down (c/d)". This means that the two columns balance. Notice however that the same figure is immediately taken down to the opposite side of the account to begin the list of transactions for the following period.
| Account of Sharp Ltd | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| DR | CR | ||||||||||
| Debit Side | Credit Side | ||||||||||
| Date | Details | Folio | Amount | Date | Details | Folio | Amount | ||||
| May 01 | Balance b/d | 550.00 | |||||||||
| May 10 | Sharp Ltd Purchase goods on credit | XYZ | 200.00 | ||||||||
| June 09 | Payment made for goods | XYZ | 200.00 | ||||||||
| June 15 | Payment made for goods | YXY | 300.00 | ||||||||
| June 30 | Balance c/d | 250.00 | |||||||||
| £750.00 | £750.00 | ||||||||||
| July 01 Balance b/d | £250.00 | ||||||||||
You now need to understand what sort of accounts each of the ledgers contain. Do you want to look at these ledgers now or return to the menu?