Balancing and Closing a Ledger Account

Balancing off a ledger account

Once the transactions for a period have been recorded, it will be necessary to find the balance on the ledger account:

(1)Total both sides of the T account and find the larger total.

(2)Put the larger total in the total box on the debit and credit side.

(3)Insert a balancing figure to the side of the T account which does not currently add up to the amount in the total box. Call this balancing figure ‘balance c/f’ (carried forward) or ‘balance c/d’ (carried down).

(4)Carry the balance down diagonally and call it ‘balance b/f’ (brought forward) or ‘balance b/d’ (brought down).

Illustration 

A company has the following ledger account at the period end:

It would be balanced off as follows:

Closing a ledger account

At the year end, the ledger accounts must be closed off in preparation for the recording of transactions in the next accounting period. Statement of financial position

ledger accounts

Assets/liabilities at the end of a period = assets/liabilities at start of the next period, e.g. the cash at bank at the end of one day will be the cash at bank at the start of the following day. Balancing the account will result in:

• a balance c/f (being the asset/liability at the end of the accounting period)
• a balance b/f (being the asset/liability at the start of the next accounting period). These are left as they are as an opening figure that next period's transactions and events can follow on from. Income statement

ledger accounts

At the end of a period any amounts that relate to that period are transferred out of the income and expenditure accounts into another ledger account called the income statement. This is done by closing the account.

There should be no balances carried forward to the next accounting period for income statement items.

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