Question

At the end of an accounting period, the ledger accounts must be balanced off to obtain a closing balance. What is the process to achieve this?

Answer 1

Balancing off ledger accounts involves totaling debit and credit sides, finding the difference as the closing balance, and bringing it down as the opening balance for the next period.

Step-by-step explanation:

The Process of Balancing Ledger Accounts

At the end of an accounting period, ledger accounts need to be balanced off to find their closing balances. This process is essential to prepare the financial statements. To balance the accounts, you perform the following steps:

1. Sum up the totals on both the debit and credit sides of each ledger account.
2. Determine the side (debit or credit) with the larger total, which will be the balancing figure's side.
3. Subtract the smaller total from the larger total. This gives you the balance c/d (carried down), which is the closing balance of the account.
4. Write the balancing figure (balance c/d) on the side of the smaller total to equalize both sides of the account.
5. Bring down the balancing figure as the opening balance for the next period, known as the balance b/d (brought down).

This process ensures that the ledger accounts reflect the correct ending balances, which are used to compile the trial balance and subsequently the financial statements. It's important to carefully manage this process to maintain accurate financial records.