What you do when you walk out from a room? Of course you will close the door behind you. Why don’t you just let it open? Because you need to close it, that’s is the function of having a door, right?
Balancing off normally is done at the end of a period. But it is actually done when you want it. If you want to close your account today because you need to prepare a financial presentation tomorrow, then you need to close it by today. What you need is to do balancing off of all your accounts.
By doing balancing off, you may get your total balance of the accounts. How much you have at the end of the period. It is either you can prepare for the next course of action or you can do some decision making on it.
What you need to do is to look at the account…. Don’t just look at it coz you achieve nothing! Look at the total of both sides, the debit and credit side of the the account. Then total all of them up and see the difference. If the debit is higher than the credit, then we call the account has a debit balance. DEBIT WINS! The debit amount is higher than the credit. If the credit total is higher, then we call it as credit balance.
The difference of the total is what you have for the balance of that particular period. Say… the debit total is RM100,000 whereas the credit total is RM80,000. Then we know that the debit total is more. DEBIT WINS. We call the account has a debit balance. We do a balancing off by having the same total for both sides and of course the credit has to top up another RM20,000 to be at the same total as the debit side. That RM20,000 is the balance of the said account.
Is that simple!
Coming up next! the Trial Balance…