After the posting the entries from the journals in to the ledger, the balancing of the individual accounts is done. After doing the balancing we can know the actual position of the accounts on a given date. The method of balancing is very simple. We have the Debit amount column and Credit amount column in account. We have to do the totals of both of columns. If total amount of debit column is more than total amount of credit column then the balance will be debit balance and will be shown in balance column of the account as Dr. Balance and if the total amount of Credit column is more than the total amount of debit column then the balance will be credit balance and will be shown in balance column of the account as Cr. Balance. Suppose, if the totals of the Debit and Credit columns are equal in that case the balance will be nil and will be shown in balance column of ledger as Nil without indicating as Dr. or Cr. in sub column of balance column.

Balancing can be done on running basis. Running balance means that the balancing of the ledger after every entry. Balancing can be done on periodically basis in the ledger. It is not necessary to do the balancing of accounts after each and every entry. The frequency of the balancing of the accounts depends on the requirement of information required by the company in respect of the particular ledger. Even otherwise the balancing must be done on monthly basis and final balancing is done at the end of the financial year. The balances of certain accounts like assets and liabilities are carried forward in next year. When the final balancing is done at the end of the financial year then the balance in accounts are called closing balance. The closing balance of certain accounts like assets and liabilities become the opening balance of the next financial year.

RELATED TERMS: