- Balancing
6.1. Till now, we have studied about all the Accounts Books to be maintained,
namely cash book, purchases book, purchases return book, sales book, sales
returns book, Bills receivable book, Bills payable book and journal proper.
All these books are called Books of Original Entry. From these books
Ledger Accounts will be opened. The Ledger Accounts will have two sides;
the debit side and the credit side. If the debit is more than the credit side, it
will be called as debit balance. If the credit side is more than the debit side,
it will be called as credit balances.
6.2. The debit balance will be posted on the credit side to balance the accounts
and the credit balance will be posted on the debit side to balance the
accounts. This balancing will normally be done at the month end and also at
the end of the Accounting Year.
6.3. The debit balance of Personal Account shows ‘outstanding asset’. The credit
balance of Personal Account, shows ‘outstanding liability’.
6.4. The credit balance of Nominal Accounts shows gain. The debit balance of
Nominal Account shows loss or expenses
- Capital Account
7.1. The amount brought in to the business by a trader will be credited to Capital
Account
- Drawings Account
8.1. Amount drawn for personal use from business will be debited to drawings
account.
8.2. At the time of balancing, the debit balance of drawings account will be
debited to the capital account to reduce the capital account to the extent of
drawings.
8.3. Every trader must maintain separate accounts for each personal account i.e.,
for each persons, each organization i.e., name-wise etc.
