ACCA FA Syllabus C. The Use Of Double-entry And Accounting Systems - Balance and close a ledger - Notes 3 / 3
The totals from the books of prime entry are posted to the nominal accounts in the nominal ledger through double-entry.
A business will want to know the balance on each account (to add to the Trial Balance). This is done by 'balancing off' each account.
Steps to balance off a ledger account
Add the debit and credit sides separately.
Fill in the higher of the two totals on both sides.
'Balance' the account (make the two sides equal) – balance c/d
Complete the 'double entry' – balance b/d on the opposite side.
Example 1
In the books of Cows Co:
Year 2016
Jan 1 - Paid $50,000 into a business bank account
Jan 9 - Bought goods for $2,000
Jan 11 - Cash Sales $5,000
Required
Balance off a ledger account (Bank a/c & Cash a/c only) as at 31 Jan 2016.
Solution
| Bank account and Cash account | |
|---|---|
| DR | CR |
| Step 1: Jan 1 Capital 50,000 | Step 1: Jan 9 Purchases 2,000 |
| Step 1: Jan 11 Sales 5,000 | |
| Step 3: 31 Jan Balance c/d (55,000 - 2,000) = 53,000 | |
| Step 2: This is the higher one ... Total (50,000 + 5,000) = 55,000 | Step 2: Total 55,000 |
| Step 4: 31 Jan Balance b/d 53,000 (you will see this figure in the Trial balance |