Page 107 - Book-keeping for Secondary Schools Student’s Book Form One

Ledgers

Balancing of accounts

The ledger postings are made for the purpose of obtaining balances that are needed for
different uses in the business. A balance of an account is the difference between the total
of the entries in the debit side of the account and the total of credit entries in an account
at any particular date or time. Balancing of an account involves calculating the balance
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and recording it on the appropriate side of the account. The balances of accounts in
the subsidiary ledger are used for the management of payables and receivables. The
balances of accounts in the general ledger at the end of a particular accounting period
are used for preparing the trial balance and financial statements.

To following steps are undertake in balancing an account:

(a) Calculate the total amounts of money on the debit side and credit side of the
account.
(b) Calculate the difference between the totals obtained in step (a) above. The
difference is actually the account balance or balancing figure.

(c) Insert the difference obtained in step (b) above on the side that had a lower
amount of total in step (a) above. The balance is labelled ‘balance carried
forward’ or in short ‘balance c/f’ to indicate that the balance is carried forward
to the next date/ month/ year. At the beginning of the next period, the balance
will be labelled ‘balance brought forward or in short ‘balance b/f’. Another way
to label the balances is to use the traditional ‘balance carried down’ or in short
‘balance c/d’ and ‘balance brought down or in short ‘balance b/d’.

(d) Write the totals of each side which should now be the same for both sides because
of the ‘balancing figure’ or simply the balance inserted in step (c) above.

Activity 5.2

After completing the posting of entries to the ledger, it is important that each ledger
account is balanced. You have attended a class on balancing of accounts and your
teacher, Ms Mwendamseke has assigned you a task to explain the account balancing
process and its importance to two of your classmates who had emergencies and
could not attend the class.

Write a brief summary that you will use in making the clarification to them.

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