Closing off accounts and trial balance
4 steps to balancing off accounts:
1. Subtotal the money columns on the debit and credit side of the account.
2. The difference between the two totals is entered on the smaller side and labelled
Balance carried down or c/d.
3. Underline the balances- nothing should be added underneath this line.
4. Carry the balance down to the next month on the bigger side (following the rule of
double entry) and label it Balance down or b/d.
Worked example:
Dr Bank Account Cr
Date
2011
Details
Amount
£
Date
2011
Details
Amount
£
1 Sep
Capital
5,000
2 Sep
Computer
1,800
5 Sep
J Jackson:
loan
2,500
6 Sep
Purchases
500
10 Sep
Sales
750
12 Sep
Drawings
100
15 Sep
Wages
200
30 Sep
Balance c/d
5,650
8,250
8,250
1 Oct
Balance b/d
5,650
In the table above, the debit side totals £8,250, while the credit side totals £2,600. The
difference between the two sides is £5,650.
Extracting a trial balance
A trial balance is a list of the balances of every accounting forming the ledger, distinguishing
between those accounts which have debit balances and those which have credit balances.
Debit balances include:
• Cash account
• Purchases account
• Sales returns account (returns inwards)
• Non-current asset accounts, e.g. premises, vehicles, machinery, office equipment, etc
• Expenses and overheads accounts, e.g. wages, telephone, rent paid, carriage outwards,
etc
• Drawings account
• Trade receivables’ accounts
Credit balances include:
• Sales account- referred to as ‘revenue’ in the trial balance
• Purchases returns account (returns outwards)
• Income accounts, e.g. rent income, commission income, discount received
