How to balance off a ledger account

Step by step

1. Total both sides. Add up the debit side and the credit side of the account.
2. Find the difference. The balance is the amount needed to make the smaller side equal the larger.
3. Enter the balance carried down. Insert the balance on the smaller side, labelled balance c/d, so both totals match.
4. Rule off with equal totals. Draw the totals level on both sides once the balance is inserted.
5. Bring the balance down. Enter the balance b/d on the opposite side, below the totals, to open the next period.

Worked example

A debit side of RM1,200 and a credit side of RM900 leave RM300. Enter balance c/d RM300 on the credit side. The balance b/d of RM300 on the debit side is a debit balance.

Understanding the method

Throughout a period, entries pile up on both sides of an account. But the business wants one clear figure: how much cash it holds, how much a customer owes, how much an expense has cost. Balancing off reduces the two columns to that single figure.

The balance is not a new transaction. It is a summary.

First total both sides to find which is larger. The difference is the balance carried down.

Enter it on the smaller side, so the two totals become equal. Label it balance c/d and date it the last day of the period.

Rule the totals level. Then bring the same figure down on the opposite side as balance b/d, dated the first day of the next period.

The c/d closes the old period and the b/d opens the new one. The side where the b/d lands shows the type of balance: a debit balance for an asset or expense, a credit balance for a liability, capital or income.

Questions may ask you to write up and balance an account from a list of transactions. They may also ask for the closing balance of a part-completed account, or for a missing entry. For a missing entry, treat the unknown as the figure that makes the sides agree.

The method is the same for any account. The opening b/d you are given is simply the last period's closing c/d.

Here is an example. A customer's account has an opening debit balance b/d of RM400, a credit sale of RM1,500 and another of RM900 on the debit side. On the credit side are cash received of RM1,200 and returns inwards of RM150.

The debit side totals 400 + 1,500 + 900 = RM2,800. The credit side totals 1,200 + 150 = RM1,350.

The debit side is larger by RM1,450. Enter balance c/d RM1,450 on the credit side, so both sides total RM2,800. Rule off level.

Then bring RM1,450 down on the debit side as balance b/d. It is a debit balance, so the customer owes the business RM1,450.

To check, make sure the two ruled-off totals are identical and the c/d and b/d are the same amount on opposite sides. Also check that the b/d falls on the side you would expect for that type of account.

A customer account with a credit balance, or a bank account showing a debit when you are overdrawn, needs a second look. It may be genuine, such as an overpayment, or it may be a misplaced entry.

Common mistakes: entering the c/d on the larger side, and forgetting the b/d so there is no opening figure for the next period. Others are putting c/d and b/d on the same date, and thinking an account with entries on one side only cannot be balanced. In that case the total simply becomes the balance, carried down to the other side.

If your balances keep coming out on the wrong side, we can help. One of our teachers can write up and balance a set of ledger accounts with you and spot the habit that causes it. Book a trial class

Related skills

• How to prepare a trial balance
• How to prepare a two-column cash book
• How to post from books of prime entry to the ledger

The methods here are standard accounting practice, with original figures. For your exam board's exact requirements, see exam boards and Sources.