An account has debits of $900 and credits of $640. What is the balance brought down?

$260 debit. The debit side is larger by 260, so the balance brought down is a debit.

In which ledger is the account of a credit customer kept?

the sales ledger. It holds the accounts of trade receivables.

In which ledger is the rent account kept?

the nominal (general) ledger. All accounts other than those of credit customers and suppliers are there.

A supplier's account has a credit balance brought down of $700. What does it mean?

The business owes the supplier $700. A credit balance on a supplier's account is a liability.

What happens to the balance on an expense account at the end of the year?

It is transferred to the statement of profit or loss. Income and expense accounts are closed off each year.

What is special about the running balance format of an account?

The balance is shown after every entry. There is no need to balance the account at the end: the last figure is the balance.

Balancing accounts and the division of the ledger

In plain words

After a month of entries, an account is a jumble of debits and credits. Balancing it boils them down to one figure: how much is left, and on which side.

With hundreds of accounts, a business also needs to keep them in order. The ledger is split into three parts, by the kind of account.

6 things to know

To balance an account: total both sides, and find the difference. Write the difference on the smaller side as the balance carried down (c/d), so that both totals agree. Then bring it down (b/d) on the opposite side, dated the next day.
A debit balance brought down on a customer's account means the customer owes the business. A credit balance on a supplier's account means the business owes the supplier.
At the year end, income and expense accounts are closed by transferring their totals to the statement of profit or loss. Asset, liability and capital accounts are balanced and carried into the next year.
An account can also be shown in three-column running balance format: a debit column, a credit column and a balance column that is updated after every entry.
The sales ledger holds the accounts of credit customers. The purchases ledger holds the accounts of credit suppliers. The nominal (general) ledger holds all the other accounts.
Ledger accounts can be kept digitally. The software makes both entries from one input and keeps every balance up to date.

Worked example

Ali's account in the sales ledger has debits of $300 (balance on 1 May) and $450 (sales on 8 May), and credits of $280 (bank on 15 May) and $50 (sales returns on 20 May). Balance the account on 31 May.

Total the debit side: 300 + 450 = 750. Total the credit side: 280 + 50 = 330.
The difference is 750 − 330 = 420. The credit side is smaller, so enter "balance c/d 420" on the credit side, dated 31 May.
Both sides now total 750.
Bring the balance down on the debit side on 1 June: "balance b/d 420". Ali owes $420.

Tips and tricks

Carried down goes on the smaller side. Brought down goes on the other side, on the next day. The balance is named after the side it is brought down on.
Customers' personal accounts are in the sales ledger. The sales account itself is in the nominal ledger. Do not confuse the two.

6 questions, about 2 minutes.

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Balancing accounts and the division of the ledger: 6 questions and answers

These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.

An account has debits of $900 and credits of $640. What is the balance brought down?
- $260 credit
- $260 debit (the answer)
- $1540 debit
- $640 credit
The debit side is larger by 260, so the balance brought down is a debit.
In which ledger is the account of a credit customer kept?
- the sales ledger (the answer)
- the purchases ledger
- the nominal ledger
- the cash book
It holds the accounts of trade receivables.
In which ledger is the rent account kept?
- the sales ledger
- the purchases ledger
- the nominal (general) ledger (the answer)
- the petty cash book
All accounts other than those of credit customers and suppliers are there.
A supplier's account has a credit balance brought down of $700. What does it mean?
- The supplier owes the business $700.
- The business owes the supplier $700. (the answer)
- The business has paid $700 too much.
- Goods worth $700 were returned.
A credit balance on a supplier's account is a liability.
What happens to the balance on an expense account at the end of the year?
- It is carried down to next year.
- It is transferred to the statement of profit or loss. (the answer)
- It is added to capital.
- It is ignored.
Income and expense accounts are closed off each year.
What is special about the running balance format of an account?
- It has no dates.
- The balance is shown after every entry. (the answer)
- It only records debits.
- It is used only for customers.
There is no need to balance the account at the end: the last figure is the balance.

6 questions

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Worksheet

2 questions, 6 marks. Write your answers on paper, then check them.

Balancing accounts and the division of the ledger

Cambridge IGCSE Accounting 0452 · 6 marks · papermunch.org

Name ______________________________ Date ______________

An account has total debits of $2300 and total credits of $1850. State the balance carried down, the side it is entered on, and what kind of balance is brought down.[3]
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$450, entered on the credit side as the balance c/d. It is brought down on the debit side, so the account has a debit balance.
I got this one
Name the three divisions of the ledger and state what each contains.[3]
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The sales ledger: accounts of credit customers. The purchases ledger: accounts of credit suppliers. The nominal (general) ledger: all other accounts, such as assets, expenses, income and capital.
I got this one

Answers: Balancing accounts and the division of the ledger

1. $450, entered on the credit side as the balance c/d. It is brought down on the debit side, so the account has a debit balance.
2. The sales ledger: accounts of credit customers. The purchases ledger: accounts of credit suppliers. The nominal (general) ledger: all other accounts, such as assets, expenses, income and capital.