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Ledger accounting and double-entry bookkeeping

6.2 Balancing off a statement of financial position ledger account

When all transactions for an accounting period have been recorded, it will be
necessary to find the balance on each ledger account as follows:

(1) total both sides of the T account and identify the larger total.

(2) put the larger total in the total boxes at the bottom of the debit side and the
credit side.

(3) insert a balancing figure to the side of the T account which does not currently
add up to the amount in the total box. Call this balancing figure ‘balance c/f’
(carried forward) or ‘balance c/d’ (carried down), and

(4) carry the balance down diagonally and call it ‘balance b/f’ (brought forward) or
‘balance b/d’ (brought down).

The statement of financial position shows the assets, liabilities and capital that
exist at the date at which it is prepared. It will include ALL the ledger accounts that
have balances carried forward on them.

 Assets/liabilities at the end of one accounting period = Assets/liabilities at the
start of the next accounting period, e.g. the cash at the bank at the end of one
day will be the cash at the bank at the start of the following day.

 Balancing the accounts will result in: – a ‘balance c/f’ (being the asset/liability at
the end of the accounting period) – a ‘balance b//f’ (being the asset/liability at
the start of the next accounting period).

6.3 Closing off ledger accounts

At the year-end, the ledger accounts must be closed off in preparation for the
recording of transactions in the next accounting period. As demonstrated this is either
done by transferring the existing balance to the statement of profit or loss or by
calculating the closing balance to carry forward on the asset/liability/capital account.

Tutor notes guidance – discussion points

Take students through illustration 2 from chapter 4 of the Study Text.

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