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Balancing the Accounts

The ledger accounts are periodically balanced at the end of the accounting period, with the object of ascertaining the net position of each amount. Balancing of an account means that the two sides are totaled and the difference between them is shown on the side, which is shorter in order to make their totals equal. The words 'balance c/d' are written against the amount of the difference between the two sides. The amount of balance is brought (b/d) down in the next accounting period indicating that it is a continuing account, till it is finally settled or closed. In case the debit side exceeds the credit side, the difference is written on the credit side, if the credit side exceeds the debit side, the difference between

the two appears on the debit side and is called debit and credit balance respectively. The accounts of expenses losses and gains/revenues are not balanced but are closed by transferring to trading and profit and loss account.

 

Problem#7
The balancing of the account is illustrated below with the help of an example explaining the complete process of recording the transactions, posting to ledger and balancing there of:

 

Date

Details

2005

Apr. 01

Apr.02

Apr. 02

 

Apr.l 03



Apr. 04



 

Apr.l 04


Apr. 05



Apr. 05

 



Apr. 06

 

 


Apr. 07

 


Apr. 08
 

 

Apr. 10

Apr. 11

 

Apr. 11

 

 

 

Apr. 12

Apr. 15

Apr. 16
 

Apr. 18
 

 

Apr. 19
 

Apr. 20
 

Apr. 21

 

Apr. 21
 

Apr. 23


Apr. 23
 

Apr. 24

Apr. 25

Apr. 25


Apr. 26

 

Apr. 27

Apr. 28

Apr. 30

Apr. 30

Apr. 30

Apr. 30

 

Commenced business with cash Rs. 1,00,000.

Deposited in bank Rs. 40,000.

Purchased for cash furniture Rs. 6,000;

Land Rs. 42,000.

Paid cheque to M/s Malika & Brothers for purchase of electric wires and plugs Rs. 17,000.

Bought of M/s Handa Co. vide invoice no. 544:

(i) 28 Immersion Heaters 1,000 Watt of Smg. Ltd. @ Rs. 50, and

(ii) 40 Tube lights @ Rs.35. trade discount @ 12.5%.


Purchased stationery for cash Rs. 2,300.

Loan from M/s Dayal Traders. @ 6% Rs. 25,000 and deposited money in the
bank on the next day.

Paid cartage Rs. 80 and other charges Rs. 20.

Bought of M/s Burari. Ltd. on account vide Invoice No. 125:

(i) 50 Table lamps (Universal) @ Rs. 80 :

(ii) 20 Electric kettles (General) @ Rs. 125.

(iii) 5 Electric iron@ Rs. 300. trade discount 20%.

Sales to M/s Ramneek on account vide invoice no. 871:

(i) 10 Immersion heaters1000 watt @ Rs. 60.

(ii) 5 Table lamps @ Rs. 100:

(iii) 2 Electric irons @ 320.

Sales to M/s Kapadia on credit vide invoice no. 880

(i) 15 Immersion heaters @ 60:

(ii) 15 Tube lights @ Rs. 38.

Return inwards from Ramneek :

(i) 2 Immersion heaters,

(ii) 1 Electric iron.

Paid rent by cheque Rs. 4,000.

Purchased from M/s Rungta. for cash:

(i) 5 Immersion heaters 1000 watt @ Rs. 45.

Returned goods to Burari Ltd. :

(i) 3 Table lamps (Universal)

(ii) 2 Electric kettles

(iii) 1 Electric iron.

Purchased on account furniture from quality Furniture Ltd. Rs. 8,000.

Paid for advertisement Rs. 1,200.

Sales to M/s Daman on account vide invoice no. 902:

(i) 10 Electric kettles (General) @ Rs. 130.

Purchased from M/s Kochhar Co. on credit vide invoice no.205:

(i) 25 Electric Mixers @ Rs. 600.

(ii) 40 Electric irons (Special) @ Rs. 540. trade discount 20%.
Sales to M/s Ramneek on account vide bill no.925: 4 Electric Mixers

@ Rs. 600.

Received cheque of Rs.3,700 from M/s Ramneek for full and final settlement

of claim. The cheque deposited in bank after two days.

Purchased from M/s Burari Ltd. on credit vide invoice no.157:

(i) 10 Electric kettles @ Rs. 125

(ii) 20 Electric lamps @ Rs. 80 trade discount @ 20%.

Sales to M/s Nutan on account vide invoice no.958:

(i) 2 Electric Mixers @ Rs. 600.

Cash sales of Electric wires and plugs Rs. 14,500, cash discount allowed Rs. 200.

Cash purchases from M/s Hitesh:

(i) 5 Electric fans @ Rs. 740.

Paid electricity bill Rs. 1,320.

Made full and final payment to M/s Burari Ltd. by cheque discount allowed by them Rs. 320.
Purchased stationery on account from M/s Mohit Mart Rs. 3,200.

Sales to M/s Daman on account vide Invoice No. 981:

(i) 15 Table lamps @ Rs. 100

(ii) 10 Immersion heaters 1000 watt @ Rs. 80.

Deposited in bank Rs. 5,000.

Withdrew Rs. 8,000 for personal use.

Paid telephone bill Rs. 2700 by cheque.

Paid insurance Rs. 1,600 by cheque.

Paid to M/s Handa Co. Rs.2,450 by cheque; and Rs. 28,000 to M/s Kochhar and co. by cheque who allowed Rs. 1,280 as discount


Solution:

Sales (Journal) Book

Date

Invoice No.

Name of the Supplier

(Account to be Credited)

L.F.

Amount

Rs.

2005

Apr 07

Apr 08

Apr 18

Apr 20

Apr 23

Apr 27

Apr 30

 

871

880

902

925

958

981

 

 

Ramaneek

Kapadia

Daman

Ramneek

Nutan

Daman

 

 

1,740

1,470

1,300

2,400

1,200

2,300

_______

10,140

_______

 

Purchases Return (Journal) Book

Date

Debit

note No.

Name of supplier

(Account to be Debited)

L.F.

Amount

Rs.

2005

Apr 12

Apr 30

 

Burari Ltd.

 

632
______

632

______


Sales Return (Journal) Book

Date

Credit

note No.

Name of the Customer

(Account to be Credited)

L.F.

Amount

Rs.

Apr 10

Apr 30

 

Ramneek

 

440

_____

440

_____


Journal Proper

Date

Particulars

L.F.

Debit

Amount

Rs.

Credit

Amount

Rs.

2005

Apr. 15

 

 

Apr. 25

 


 

Apr. 26

 

 

Apr. 30

 

 

Furniture A/c Dr.

To Quality Furniture A/c

(Purchase of furniture on credit)
Burari Ltd A/c Dr.

To Discount A/c

(Discount received)

Stationery A/c Dr.

To Mohit Mart A/c

(Purchase of Stationery items on credit)

Kochhar A/c

To Discount A/c

(Discount received)
 


Total

 

 

8,000

 

 

320

 



3,200

 

 

 

1,280

 

 

 


12,800

 

 

8,000

 

 

320

 




3,200

 

 

 

1,280

 

 

12,800


Cash Book

Date

Particulars

L.F.

Cash

Rs.

Bank

Rs.

Date

Particulars

L.F.

Cash

Rs.

Bank

Rs.

2005

Apr

01

02

05

06

21

23

23

28

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

May

01

 

Capital

Cash

6% Loan

Cash

Ramneek

Cash

Sales

Cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

Balance b/d

 

 

 

C

 

C

 

C

 

C

 

1,00,000



25,000



3,700



14,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





_______

1,43,200

_______

4,655

 

 

 

40,000



25,000



3,700



5,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





______

73,700

______

10,222

 

05

Ap

02

02

02

03

04

05

06

11

11

16

23

24

25

28

30

30

30

30

30

30

30

 



Bank

Furniture

Land

Purchases

Stationery

Miscellane

ous. exp

Bank

Rent

Purchases

Advertise

ment

Bank

Purchases

Electric

charges



Burari Ltd.

Bank
Drawings

Telephone
charges

Insurance

Handa Co.
Kochhar & Co.



 

Balance c/d

 

 

 

C

 

 

 

 

 

 

C

 

 

 

 

C

 

 

 

 

 

C

 

40,000

6,000

42,000

2,300

100

25,000

225

1,200

3,700

3,700

1,320

5,000

8,000

 

1,600

 

4,655

 

 

 

 

 

 

 

 

 

 



 

______

1,43,200

_______

 

 

 

 

17,000

 

 

 

4,000

 

 

 

 

 

 

7,728

 

2,700

2,450

28,000

10,222

 

 

 

 

 

 

 





____

73,700

______

 

The recorded transactions will be posted in the ledger:
Capital Account
Dr. Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

Balance c/d

 



1,00,000

_______

1,00,000

_______

2005

Apr 01

 

Cash

 

 



1,00,000

________

1,00,000

________


6% Loan Account

Dr.             Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

Balance c/d

 

25,000

_______

25,000

_______

2005

Apr 01

 

Cash

 

 

25,000

________

25,000

________


Ramneek's Account

Dr.             Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 07

Apr 20

Sales

Sales

 

1,740

2,400

______

4,140

______

2005

Apr 10

Apr 21

 

Sales Return

Cash

 

 

440

3,700

______

4,140

______

 

Sales Account

Dr.             Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

       

2005

Apr 23

Apr 30

 

Cash

Sundries

 

 

14,500

10,410

______

24,910

 

Furniture Account

Dr.             Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 02

Apr 15

Cash

Quality

Furniture

 

6,000

8,000

_____

14,000

_____

2005

Apr 30

 

Balance c/d

 

 

14,000

______

14,000

______


Land Account

Dr.             Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 02

 

 

Cash

 

 

42,000

______

42,000

______

2005

Apr 30

 

Balance c/d

 

 

42,000

______

42,000

______

 

Purchases Account

Dr.             Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 03

Apr 11

Apr 24

Apr 30

 

 

Bank

Bank

Cash

sundries

 

 

17,000

225

3,700

40,410

______

61,335

______

       


Stationery Account

Dr.             Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 04

Apr 26

 

 

Cash

Mohit mart

 

 

2,300

3,200

______

5,500

______

       

 

Miscellaneous Expenses Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 05

 

 

Cash

 

 

100

_____

100

       

 
Rent Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 04

 

 

Bank

 

 

4,000

_____

4,000

       


Advertisement Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 16

 

 

Cash

 

 

1,200

______

1,200

______

       


Electricity Charges Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 25

 

 

Cash

 

 

1,320

_____

1,320

______

       


Drawings Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

 

Cash

 

 

8,000

_______

8,000

______

       


Telephone Charges Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

 

Bank

 

 

2,700

_____

2,700

______

       


Insurance Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

 

Bank

 

 

1,600

______

1,600

______

       


Quality Furniture Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

 

Balance c/d

 

 

8,000

______

8,000

______

2005

Apr 15

 

Furniture

 

 

8,000

______

8,000

______


Mohit mart Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

 

Balance c/d

 

 

3,200

_____

3,200

___ __

2005

Apr 26

 

Stationery

 

 

3,200

_____

3,200

_____

                                              
Purchase Returns Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

       

2005

Apr 30

 

Sundries

 

 

632

_____

632

_____


Handa Company Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

 

Bank

 

 

2,450

______

2,450

______

2005

Apr 04

 

Purchases

 

 

2,450

______

2,450

_____


Burari Ltd. Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 12

Apr 25

 

Purchase Return

Bank

Discount

 

 

632

7,728

320

_____

8,680

______

2005

Apr 06

Apr 21

 

Purchases

Purchases

 

 

6,400

2,280

______

8,680

_____


Kochar Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

 

Bank

Discount

 

 

 

28,000

1,280

_______

29,280

______

2005

Apr 19

 

Purchases

 

 

 

29,280

_______

29,280

_______

Sales Returns Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 30

 

 

Sundries

 

 

440

______

440

______

       


Kapadia Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 08

 

 

Sales

 

 

1,470

______

1,470

______

2005

Apr 30

 

Balance c/d

 

 

1,470

______

1,470

_____

 

Daman Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 18

Apr 27

 

 

Sales

Sales

 

 

1,300

2,300

_____

3,600

___

2005

Apr 30

 

Balance c/d

 

 

3,600

 

______

3,600

______


Nutan Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Apr 23

 

 

Sales

 

 

1,200

_____

1,200

______

2005

Apr 30

 

Balance c/d

 

 

1,200

______

1,200

_____


Discount Received Account

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

       

2005

Apr 25

Apr 30

 

Burari Ltd

Kochhar Ltd

 

 

320

1,280

______

1,600

______

 

Key Terms Introduced in the Chapter
  • Posting
  • Sales (Journal) Book
  • Day books
  • Balancing of Accounts
  • Cash book
  • Purchase (Journal) book
  • Petty Cash book
  • Purchases return (Journal) Book
  • Sales return (Journal) Book




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