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Chapter 5

The document discusses balancing accounts and closing off accounts at the end of an accounting period. It provides examples of balancing debtors' and creditors' accounts using T-accounts and three-column accounts. The chapter objectives and key learning outcomes are also summarized.

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EricKHLeaw
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105 views17 pages

Chapter 5

The document discusses balancing accounts and closing off accounts at the end of an accounting period. It provides examples of balancing debtors' and creditors' accounts using T-accounts and three-column accounts. The chapter objectives and key learning outcomes are also summarized.

Uploaded by

EricKHLeaw
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Slide 5.

Chapter 5
Balancing-off accounts
Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.2

Learning objectives
After you have studied this chapter, you
should be able to:
Close-off accounts when appropriate
Balance-off accounts at the end of a period
and bring down the opening balance to the
next period
Distinguish between a debit balance and a
credit balance
Describe and prepare accounts in threecolumn format

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.3

Why balance accounts?


T-accounts need to be balanced at various
times during the year:
At the end of each accounting period to
summarise the situation.
Once a year to calculate profit.
To see what is happening with respect to a
particular account.

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.4

How to balance where debtors have paid


their accounts
This is the account of K. Tandy in August
2012:

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.5

How to balance where debtors have paid


their accounts (Continued)
This is the balanced account:

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.6

How to balance where debtors still owe


for goods
This is the account of D. Knight in August
2012:

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.7

How to balance where debtors still owe


for goods (Continued)
To balance, we will use a five-step approach.
1. Add up both sides to find out their totals.
Note: do not write anything in the account
at this stage.
2. Deduct the smaller total from the larger
total to find the balance.
3. Now enter the balance on the side with the
smallest total. This now means the totals
will be equal.
Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.8

How to balance where debtors still owe


for goods (Continued)
Enter totals level with each other.
5. Now enter the balance on the line below
the totals on the opposite side to the
balance shown above the totals.
4.

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.9

How to balance where debtors still owe


for goods (Continued)
This is the balanced account:

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.10

Balancing a creditors account


This is the account of E. Williams in August
2012:

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.11

Balancing a creditors account


(Continued)
This is the balanced account:

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.12

Three-column accounts
Three-column

accounts do not use the


format of the T-account.
There are three columns and the third
column provides a running total of the
balance.
Three-column accounts are very similar to
the bank statement you will receive for a
current account.

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.13

An example of a three-column account

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.14

Learning outcomes
You should have now learned:
1. How to close off accounts upon which
there is no balance outstanding
2. How to balance-off accounts at the end of
a period
3. How to bring down the opening balance
on an account at the start of a new period

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.15

Learning outcomes (Continued)


That when an opening balance on an account is
a debit, that account is said to have a debit
balance. It also has a debit balance during a
period whenever the total of the debit side
exceeds the total of the credit side
5. That when an opening balance on an account is
a credit, that account is said to have a credit
balance. It also has a credit balance during a
period whenever the total of the credit side
exceeds the total of the debit side
4.

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.16

Learning outcomes (Continued)


6.

7.

That debtors are people or organisations whose


account in your accounting books has a greater
value on the debit side. They owe you money.
They are included in the amount shown for
accounts receivable in the statement of financial
position
That creditors are people or organisations
whose account in your accounting books has a
greater value on the credit side. You owe them
money. They are included in the amount shown
for accounts payable in the statement of
financial position
Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

Slide 5.17

Learning outcomes (Continued)


That T-account and three-column accounts
disclose the same balance, given identical
information about transactions
9. That three-column accounts update and
show the balance on the account after every
transaction
10. How to prepare three-column accounts
8.

Frank Wood and Alan Sangster, Frank Woods Business Accounting 1, 12th Edition, Pearson Education Limited 2012

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