Ledger accounts and balancing off

The two-sided account

A ledger account has a debit side (left) and a credit side (right), each with columns for Date, Details and £. The Details column names the other account in the double entry.

• Bank pays rent: in the Rent account, debit 'Bank'; in the Bank account, credit 'Rent'.

Returns, drawings and discounts have their own accounts:

• Goods returned by a customer: debit Sales returns (returns inwards), credit the customer.
• Goods returned to a supplier: debit the supplier, credit Purchases returns (returns outwards).
• Owner takes goods for personal use: debit Drawings, credit Purchases.

Balancing off

1. Add both sides.

2. Write the difference on the smaller side as Balance c/d (carried down).

3. Total both sides (now equal) on the same line.

4. Bring the difference down on the opposite side as Balance b/d (brought down), dated the first day of the next period.

A debit balance b/d is an asset or an expense (or drawings); a credit balance b/d is a liability, capital or income.

Bank account for May

The ledgers

Accounts are grouped into ledgers:

• Trade receivables ledger (sales ledger): one account per credit customer.
• Trade payables ledger (purchases ledger): one account per credit supplier.
• General (nominal) ledger: all other accounts, such as sales, purchases, expenses, non-current assets, capital and drawings.
• Cash book: the cash and bank accounts, kept as a book of prime entry that is also part of the double entry.

The June 2024 examiners' report warns that abbreviations such as b/d, I/S and P/L will not earn marks, so in the exam write narratives and account names in full (Balance brought down, Statement of profit or loss).

Worked example

Balance off the Bank account above.

1. Debit side: 10,000 + 3,450 + 1,280 = 14,730.
2. Credit side: 4,600 + 900 + 2,150 + 600 = 8,250.
3. Difference 6,480 goes on the credit side as Balance c/d; both sides total 14,730.

Answer: Balance b/d £6,480 on the debit side: the business has £6,480 in the bank (an asset).

Check yourself

1. A customer's account shows: debit Balance b/d £2,300, debit Sales £5,400; credit Bank £3,900, credit Sales returns £250. Find the balance brought down.
   Show answer

   £3550. Debit total 7,700; credit total 4,150. Balance b/d = 3,550 (debit): the customer owes this.

2. A supplier's account shows: credit Balance b/d £1,850, credit Purchases £4,200; debit Bank £3,600, debit Purchases returns £300, debit Discount received £90. Find the balance brought down.
   Show answer

   £2060. Credit total 6,050; debit total 3,990. Balance b/d = 2,060 (credit): the business owes the supplier this.

3. A Balance b/d appears on the credit side of an account. The account is most likely
   • a non-current asset
   • a trade payable
   • an expense
   • drawings
   Show answer

   a trade payable. Credit balances are liabilities, capital or income.

4. In which ledger is a credit customer's personal account kept?
   • Trade payables ledger
   • General ledger
   • Trade receivables ledger
   • Cash book
   Show answer

   Trade receivables ledger. Customers who owe the business are trade receivables.

5. The owner takes goods costing £200 for personal use. Which entry is correct?
   • Debit Drawings, credit Purchases
   • Debit Purchases, credit Drawings
   • Debit Drawings, credit Sales
   • Debit Capital, credit Bank
   Show answer

   Debit Drawings, credit Purchases. Drawings increase (debit) and the goods are removed from purchases at cost (credit).

6. A credit customer returns faulty goods worth £150. Which entry is correct?
   • Debit the customer's account, credit Sales returns
   • Debit Purchases returns, credit the customer's account
   • Debit Sales returns, credit the customer's account
   • Debit Sales, credit Bank
   Show answer

   Debit Sales returns, credit the customer's account. Returns inwards reduce income (debit Sales returns) and reduce what the customer owes (credit the customer).

Practise with instant feedback Print this lesson

Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting specification (issue 2), Unit 1 and Appendices 6 to 8

Last updated 8 November 2026. Spotted a mistake? Tell us.