It’s All About (The) BALANCING OF ACCOUNT

Balancing of Account

The balancing of the account is the process of balancing the debit and the credit side of the account at a given time. That is if the sum of the debit and the credit side of an account is unbalanced, the difference between the small amounts excluding the larger amount is called the balance of the account.

For example, let me say that the sum of the debit side of Mr. Peter’s account is $1000. The sum of the credit side of his account, on the other hand, is $400. The balance of Peter’s account is ($1000-$400) = $600. This $600 is shown on the lower side, i.e. towards the credit side of the account.  

In other words, the difference between the amounts on both sides of the account is called the balance of the account.  

There are two types of balance of accounts. Like the debit balance and the credit balance.

You can also read  Accrual vs Cash Basis Accounting

Debit Balance:

If the sum of the debit side of an account is greater than the sum of the credit side, this difference is called a debit balance.  

Suppose, the sum of the debit side of Mr. Jonson’s account is $1000. And the sum on the credit side is $ 600. So, the debit balance of Mr. Jonson’s account is (1000-600) = $400. This debit balance will have to be shown as Balance c/d on the lower side of the account i.e. credit side.

Credit Balance:

If the sum of the credit side of an account is greater than the sum of the debit side of an account, this difference is called credit balance.  

Suppose, the sum of the credit side of Mr. Jonson’s account is $500. And the sum of the credit side is $200. So the credit balance of his account is (500 – 200) = $300. This credit balance will have to be shown as Balance c/d on the lower side of the account i.e. debit side.    

Procedure for determining the balance of the account

The following procedure may be followed to determine the balance of the account.  

The balance of the account is calculated by calculating the difference between the amounts of both sides of the account. In order to be equal to both sides of the account, where the amount is less, the Balance c/d must be written down. If the sum of the two sides is equal, two parallel lines must be submerged under the total of the two sides to close the account. The date on which the Balance c/d was written on the date on which the account was closed was due to be reversed on the date on which the account was opened.  

Formula for determining the balance of the account

 Debit Balance = Total amount of the debit side –Total amount of the credit side.  

Credit Balance = Total amount of the credit side –Total amount of the debit side.  

Zero Balance = Total amount of the debit side = Total amount of the credit side.  

From the above discussion, it can be said that, in the case of accounting, the balance between the debit and the credit side of the account is determined by the balancing of the account. As a result, the actual financial situation of the organization is known.    

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