Ledger balancing or Closing of ledger account | Ledger

In the previous article, we have already covered the meaning of the ledger, types of the ledger and how to post journal entry into the ledger account. So if you have not checked it yet then please check it first then read this article. We will cover only the ledger balancing in this article.

What is Ledger balancing?

The Ledger balancing of an account means that when the postings of transactions into the ledgers are over, we have to ascertain the difference in the total of both sides of the account and putting it on the shorter side of the ledger account. After ascertaining the difference we will get two types of balance show as below:

1. Debit Balance:
2. Credit Balance:

1. Debit Balance:  

If the debit side of an account exceeds the credit side, the account is said to have a “debit balance” to the extent of such difference which is put on the credit side of the account in order to make the totals of the two sides equal and against this amount, the words “By balance C/d”  (C/d means carried down) is written in the particulars column. This balance is brought down on the debit side while opening the account for the next period and the words “To balance B/d” (B/d Means Brought down) is written in the particulars column.

Step Involved in the Ledger Balancing: –

The following steps are involved in the ledger balancing:-  (These steps are common for both balances)

We will explain it further with the Illustration.

Example of Ledger Balancing: –

Please Prepare Furniture account from the following information:

• 01/04/2017  Started the business with cash Rs 50,000 and furniture worth Rs 1,00,000/-.
• 01/06/2017  Furniture sold for Rs 35000/- and get paid by a cheque. (Note we ignored Profit/ Loss and Depreciation)
• 31/07/2017  New Furniture purchase for Rs. 50,000 and paid by a cheque.
• 31/12/2017  Further furniture purchase for Rs 10,000 and paid by cash.
• 31/01/2018  Further new furniture purchased from Ram & Sons worth Rs 90,000/-.
• 31/03/2018  Depreciation charged on furniture for Rs 15,000/-.

Here is the total 6 number of transaction in the question solved in the following image. We had prepared only the Furniture account and ignore the rest of all account to understand our main topic ledger balance easily.

Now we will show you a solution with the above table: –

Or we can solve this like shown below (we will highlight all the changes made in the step with green colour):- 

1st Step, Total both sides of the ledger account:

Then we get to the above-shown image:

Total of Debit side = 2,50,000/- 

and

Total of Credit side = 50,000/-

“Note: – This above calculation not shown in the ledger account it is only for you and you can do it on a rough sheet.”

2nd Step, Writes the total of the largest side on both sides at the end of the ledger account: Rs 2,50,000 is the largest from both sides.

As shown in the above image we wrote Rs 2,50,000 on both sides of the account.

Ledger Balancing – Example Solve – Step 2

3rd Step, Subtract shorter side total from the larger side total:

Means Less credit side total from debit side total.

2,50,000 – 50,000 = 2,00,000 

Now, we get the balance from the debit side =  Rs 2,00,000/- it is called a debit balance.

“Note: – This above calculation not shown in the ledger account it is only for you and you can do it on a rough sheet.”

4th Step, Write balance amount we got on the shorter side of the ledger account before the total amount as shown in the below image: –

5 Step, Bought down this balance in the next financial year. It will be shown on the opposite side of the ledger account as shown in the image below:-

2. Credit Balance:  

If the Credit side of an account exceeds the Debit side, the account is said to have a “Credit balance” to the extent of such difference which is put on the Debit side of the account in order to make the totals of the two sides equal and against this amount, the words “To balance C/d”  (C/d means carried down) is written in the particulars column. This balance is brought down on the Credit side while opening the account for the next period and the words “By balance B/d” (B/d Means Brought down) is written in the particulars column.

We will explain it further with the following Example:

Here is the total 6 number of transaction in the question solved in the following image. I will explain to you the all the transaction below and we will prepare only Capital account and ignore rest all account.

• 01/04/2017  Started the business with cash Rs 50,000 and furniture worth Rs 1,00,000/-.

You can also learn to balance all type of accounts from the following links: –

• Expenses Ledger Balancing
• Income Ledger balancing
• Asset Ledger balancing
• Liability Ledger balancing

Thanks for reading the topic of Ledger Balancing.