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The Accounting Cycle Lesson 5 – Balancing Off the Accounts. Three Categories of Balancing Off the Accounts. At the period end, all accounts will be balanced off to find out the amount carried to next period (i.e. the balances). There are three categories of balancing off the accounts:
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Three Categories of Balancing Off the Accounts • At the period end, all accounts will be balanced off to find out the amount carried to next period (i.e. the balances). • There are three categories of balancing off the accounts: • Debit Total = Credit Total • Debit Total > Credit Total (i.e. Debit Balance) • Debit Total < Credit Total (i.e. Credit Balance)
1. Debit Total = Credit Total Example 1 On 3 March 2005, the firm sold goods $1,000 on credit to Mr. Chan. He returned goods $200 to the firm on 13 March and settled the account in cash on 20 March. In the books of the firm,
What if…Debit Total = Credit Total At the period end, the totals of debit side and credit side of an account should be written on the same level. Any difference will be calculated and marked as balance carried down to next accounting period as an opening entry. Bal c/d = Balance carried down Bal b/d = Balance brought down
2. Debit Total > Credit Total Debit Balance Example 2 On 11 August 2006, the firm sold goods $3,000 on credit to George. He returned goods $500 to the firm on 17 August and repaid $1,600 by cheque on 30 August. In the books of the firm,
3. Debit Total < Credit Total Credit Balance Example 3 On 5 December 2005, the firm purchased goods $20,000 on credit from Nature Company. It returned goods $900 and repaid $10,000 by cheque to Nature Company on 15 December 2004. In the book of the firm,
Exercises (Question) The following transactions took place in the month of October:
Exercises (Question) Required: • Record the above transactions in ledger accounts; • Balance off the accounts and bring down the balances to the next period.
