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Ledger Balancing

The act of finding the balance in a ledger account is called ledger balancing. The ledger account collects all the debits and credits made in relation to an account head at a single place. The difference is placed on the shorter side. From this, ledger account balance can be obtained by setting off the sum of all the debits against the sum of all the credits and placing the difference on the shorter side by writing “To balance carried down” or “By balance carried down”.

The ledger account balance is interpreted as

 

  • Debit balance – If debit side is greater than credit side
  • Credit balance – If credit side is greater than debit side
     
    Mathematically, the balance is the absolute difference between the credit side total and the debit side total.
     
    Ledger account balance = [Debit side total - Credit side total]

Note: All nominal accounts are totalled and transferred to Trading & Profit & loss A/c. All personal & real accounts are balanced.

 

Example: Extract of ledger account.

 

Dr.

XYZ Account

Cr.

Date

2012

Particulars

J.F.

Date

2012

Particulars

J.F.

Apr 01

Apr 14

Apr 18

To Balance b/d

To Y

To Sales A/c

 

4,150

990

500

Apr 01

Apr 08

Apr 31

By Purchases A/c

By Plant A/c

By Balance c/d

 

1,900

150

3,590

 

 

 

5,640

 

 

 

5,640

May 01

To Balance b/d

 

3,590

 

 

 

 


Here,

Total of Debit side is (4,150 + 990 +500) = 5640

Total of credit side is (1,900 + 150) = 2050

So, it is Debit balance as debit side is greater than credit side
 

Note: Personal accounts and real accounts are balanced. But nominal accounts are not balanced. They are transferred to the Profit and Loss Account at the end of the year. 

 

Illustration 1

 

Prepare necessary ledger accounts for below transactions in the books of Rajeev trader

1st April

Debit Balance: Cash in hand ₹4,000; Bank ₹12,500; Stock of goods ₹10,000; Building ₹50,000; Sundry debtors: Yogesh ₹1,000; Roger ₹1,000

Credit balance: Sundry creditors – John’s ₹2,500

2nd April

Purchased goods worth ₹2,500 for cash, less 20% trade discount and 5% cash discount

4th April

Received ₹990 from Yogesh and allowed him ₹10 as discount.

8th April

Purchased printer from Vibhor for ₹2,500 and paid ₹50 as cartage for bringing the printer to the factory and another ₹100 as installation charges

15th April

Roger became insolvent and could only pay 25 paise in a rupee

18th April

Sold goods to Shikha for cash ₹500


Solution:

 

Dr.

Cash Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 01

April 04

April 15

April 18

To Balance b/d

To Yogesh A/c

To Roger A/c

To Sales A/c

 

4,000

1999

250

500

April 02

April 08

April 31

 

By Purchase A/c

By Printer A/c

By Balance c/d

 

 

1,900

150

3,690

 

 

 

 

5,740

 

 

 

5,740

1st May

To Balance b/d

 

3,690

 

 

 

 

 

Dr.

Bank Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 01

To Balance b/d

 

12,500

April 31

By Balance c/d

 

12,500

 

 

 

12,500

 

 

 

12,500

May 01

To Balance b/d

 

12,500

 

 

 

 

 

 

 

 

Dr.

Stock Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 01

To Balance b/d

 

10,000

April 31

By Balance c/d

 

10,000

 

 

 

10,000

 

 

 

10,000

May 01

To Balance b/d

 

10,000

 

 

 

 

 

Dr.

Building Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 01

To Balance b/d

 

50,000

April 31

By Balance c/d

 

50,000

 

 

 

50,000

 

 

 

50,000

May 01

To Balance b/d

 

50,000

 

 

 

 

 

Dr.

John Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 01

To Balance c/d

 

2,500

April 01

By Balance b/d

 

2,500

 

 

 

2,500

 

 

 

2,500

 

 

 

 

May 01

By Balance b/d

 

2,500

 

Dr.

Capital Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 31

To Balance c/d

 

76,000

April 01

By Balance b/d

 

76,000

 

 

 

76,000

 

 

 

76,000

 

 

 

 

May 01

By Balance b/d

 

76,000

 

Dr.

Sales Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 31

To Balance c/d

 

500

April 18

By Cash A/c

 

500

 

 

 

500

 

 

 

500

 

 

 

 

May 01

By Balance b/d

 

500

 

Dr.

Bad Debt Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 15

To Roger A/c

 

750

April 31

By Balance c/d

 

750

 

 

 

750

 

 

 

750

May 01

To Balance b/d

 

750

 

 

 

 

 

Dr.

Roger Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 01

To Balance b/d

 

1,000

April 15

April 15

By Cash A/c

By Bad debt A/c

 

250

750

 

 

 

1,000

 

 

 

1,000

 

Dr.

Printer Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 08

April 08

To Vibhor A/c

To Cash A/c

 

2,500

150

April 31

By Balance c/d

 

2,650

 

 

 

2,650

 

 

 

2,650

1st May

To Balance b/d

 

2,650

 

 

 

 

 

Dr.

Vibhor Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 31

To Balance c/d

 

2,500

April 08

By Printer A/c

 

2,500

 

 

 

2,500

 

 

 

2,500

 

 

 

 

May 01

By Balance b/d

 

2,500

 

Dr.

Yogesh Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 01

To Balance b/d

 

1,000

April 04

Cash A/c

Discount A/c

 

990

10

 

 

 

1,000

 

 

 

1,000

 

Dr.

Discount Allowed Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 04

To Yogesh A/c

 

10

April 31

By Balance c/d

 

10

 

 

 

10

 

 

 

10

May 01

To Balance b/d

 

10

 

 

 

 

 

Dr.

Purchase Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 02

To Cash A/c

To Discount A/c

 

1,900

100

April 31

By Balance c/d

 

2,000

 

 

 

2,000

 

 

 

2,000

May 01

To Balance b/d

 

2,000

 

 

 

 

 

Dr.

Discount Received Account

Cr.

Date

Particulars

J.F.

Date

Particulars

J.F.

April 31

To Balance b/d

 

100

April 02

By Purchase A/c

 

100

 

 

 

100

 

 

 

100

 

 

 

 

May 01

By Balance b/d

 

100





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