Video Transcript 5

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Let us see how the accounts are balanced at the end of the accounting period.

What is accounting period, if you haven't seen our class on accounting concepts please watch it to know more about accounting period.

Accounting period here is one year, as it is not possible to carry each and every transaction happened in every year, we balance the accounts after every accounting period

How we are going to do it let us see

So already we learned about debit and credit balances, whenever, debit side total is greater that credit side total we say that account is having debit balance.

What ever extra amount we are having on debit side, we balance that extra amount on the credit side by writing as By balance c/d, now if you see we will get both sides amount equal that is nothing but balancing of accounts

Now what ever extra amount we have taken from debit side, and put it under by balance c/d on credit side we move that amount to the debit side again in next accounting period, by writing as To balance b/d, here another important thing to be noted is we write it as b/d

Similar way we deal with credit balance. When credit side total is greater than debit side total we say account is having credit balance

What ever extra amount we are having on credit side, we balance that extra amount on the debit side by writing as To balance c/d, now if you see we will get both sides amount equal that is nothing but balancing of accounts

Now what ever extra amount we have taken from credit side, and put it under to balance c/d on debit side we move that amount to the credit side again in next accounting period, by writing as To balance b/d, here another important thing to be noted is we write it as b/d

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Let us do the balancing of accounts for our cash account taken from our example

As we already calculated this, cash account is showing a debit balance of 4,34,000

This extra amount of 4,34,000 on debit side is posted on the credit side as By Bal C/d on Dec 31 that is end of accounting period

This makes the cash account to show same balances on both sides, that is the total on both sides will become 10,19000 this is what we call as balancing of accounts

Now in the next accounting period we open new books by posting balance amount on the opposite side by writing to Bal b/d

This is done to carry on only the balances from each account to the next accounting period instead of carrying all the transactions

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Similarly we will do balancing for Capital Account from our example.

We already know our capital account is having credit balance of 10,00000

To balance the account at the end of the accounting period that is on Dec 31 st we post the transaction as To bal c/d for the amount of 10 lakhs on the debit side of capital account

Now we see both sides amount for capital account is balanced

For the next year we open new books with transaction By Bal b/d on credit side of capital account

So this is how the balancing of accounts is done for every accounting period