Question

Explain balancing accounts in a ledger.

Answer 1

Balance Sheet ledger accounts are maintained in respect of each asset, liability and equity component of the statement of financial position.

Following is an example of a receivable ledger account:

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Balance brought down is the opening balance is in respect of the receivable at the start of the accounting period.

These are credit sales made during the period. Receivables account is debited because it has the effect of increasing the receivable asset. The corresponding credit entry is made to the Sales ledger account. The account in which the corresponding entry is made is always shown next to the amount, which in this case is the Sales ledger.

This is the amount of cash received from the debtor. Receiving cash has the effect of reducing the receivable asset and is therefore shown on the credit side. As it can seen, the corresponding debit entry is made in the cash ledger.

This represents the balance due from the debtor at the end of the accounting period. The figure has been arrived by subtracting the amount shown on the credit side from the sum of amounts shown on the debit side. This accounting period's closing balance is being carried forward as the opening balance of the next period.

Similar ledger accounts can be made for other balance sheet components such as payables, inventory, equity capital, non current assets and so on.

Answer 2

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