2. Balancing Off Ledger Accounts

Question 1

At the end of a reporting period, when all adjustment journals have been posted, what is the accounting treatment for each nominal ledger account?

Answer 1

At the end of a reporting period, when all adjustment journals have been posted, each nominal ledger account must be balanced off.

Question 2

At the end of a reporting period, what is the accounting treatment for income or expense accounts?

Answer 2

For income or expense accounts, the balance is transferred to a profit and loss ledger account, leaving nil balance in the income or expense account.

Question 3

At the end of a reporting period, what is the accounting treatment for asset, liability and capital accounts?

Answer 3

For asset, liability or capital accounts, the balance on the account is carried down and brought down to give the opening balance for the next accounting period.

Question 4

How do you calculate the balance carried down on the cash at bank account?

What is the distinction between balance carried down and balance brought down.

Answer 4

1. First the debits and credits are totalled.
2. The larger total is placed in total columns on both the debit side and the credit side of the account.
3. The smaller total is then subtracted from the larger total, and this amount is inserted as the balance on the side which had the smaller total.
   This is referred to as the balance carried down (often just written as Balance c/d)

The balance carried down at the end of one reporting period becomes the balance brough down (Balance b/d) at the start of the following period.