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Chapter 4

Illustration 1

If we look back at the cash account which was produced for Example 4 in
Chapter 3, we can illustrate how to balance the ledger.

Cash
Dr $ Cr $
01-May Capital 20,000 02-May Bank 15,000
12-May Sales 210 07-May Wages 60
25-May Sales 430 22-May Purchases 3,900
28-May Sales 890 24-May Fittings 600
25-May Wages 110
30-May Drawings 100

1 Add both sides of the ledger and enter the highest balance in the total for
both the debit and credit side. In this example the debit side totals
$21,530 (meaning that that amount has been received) and the credit
side totals $19,770 (meaning that that amount has been paid out).

2 We should therefore take the higher figure of $21,530 and enter it into
both totals.

3 Now find the difference required to make the lighter side of the ledger
agree with the total. In this example the credit side only added up to
$19,770 and will therefore need an entry of $1,760 to make it agree with
the total. This entry is called the balance carried down.

4 Finally enter the amount called the balance carried down on the
diagonally opposite side of the ledger below the total and call it the
balance bought down. This represents the opening amount on the
account for the following accounting period. In this example we will have
a balance bought down on the debit side of $1,760 which represents an
asset.

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