CIMA BA3 Syllabus B. RECORDING ACCOUNTING TRANSACTIONS - Balancing off accounts - Notes ^{9 / 35}

Examples of Revenue accounts

1. Sales

2. Purchases

3. Telephone and rent expenses

The total of the revenue accounts for an accounting period is included in the statement of profit or loss for that period, so the account is at zero - ready for postings for the next period.

Examples of Capital accounts

1. Bank

2. Petty Cash

3. Receivables

4. Payables

The accounts in the statement of financial position do not disappear at the end of the accounting period.

Therefore, the process for balancing off capital accounts is different from that of balancing off revenue accounts.

The totals from the books of prime entry are posted to the nominal accounts in the nominal ledger through double-entry.

A business will want to know the balance on each account (to add to the Trial Balance). This is done by 'balancing off' each account.

Steps to balance off a capital ledger account

1. Add the debit and credit sides separately.

2. Fill in the higher of the two totals on both sides.

3. 'Balance' the account (make the two sides equal) – balance c/d

4. Complete the 'double entry' – balance b/d on the opposite side.

Example 1

In the books of Cows Co:

Year 2016
Jan 1 - Paid $50,000 into a business bank account
Jan 9 - Bought goods for $2,000
Jan 11 - Cash Sales $5,000

Required
Balance off a ledger account (Bank a/c & Cash a/c only) as at 31 Jan 2016.

Solution