Page 73 - DCOM101_FINANCIAL_ACCOUNTING_I

Unit 7: Posting to Ledger and Balancing

3. The third step is to find out the total of which side is greater over the other. Notes

4. The fourth step is to identify the difference among the two side's balances i.e. debit and
credit side totals.

5. The fifth step is the most important step which balances the difference on the total of the
side which bears lesser total over the greater.
6. If the balance of the debit side of the ledger is more than the credit side it is called as Debit
balance ledger and vice versa in the case of Credit balance ledger.
7. The closing balance of one ledger account will automatically become an opening balance of
the same ledger account for the next accounting period.

Balancing of Different types of Accounts

Assets: All asset accounts are balanced. These accounts always have a debit balance.
Liabilities: All Liability accounts are balanced. All these accounts have a credit balance.
Capital: This account is always balanced and usually has a credit balance.
Expense and Revenues: These Accounts are not balanced but are simply totaled up. The debit
total of Expense/Loss will show the expense/Loss. In the same manner, credit total of Revenue/
Income will show increase in income. At the time of preparing the Trial Balance, the totals of
these are taken to the Trial Balance.
Illustration: Post the journal entries into respective ledger accounts and list out their accounting
balances.
1. Jan 1,2006 Mr. Sundar has started business with a capital of ` 50,000.
Dr Cr
` `
Jan 1,2006 Cash A/c Dr 50,000
To Sundar Capital A/c 50,000
Being capital brought by Sundar as cash
2. Jan 2,2006 Goods purchased ` 10,000
Dr Cr

` `
Jan 2,2006 Purchase A/c Dr 10,000
To Cash A/c 10,000
Being cash purchase is made
3. Jan 5, 2006 Goods sold ` 5,000

Dr Cr
` `
Jan 5,2006 CashA/c Dr 5,000
To Sale A/c 5,000
Being cash sale is made

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