Significance of balancing

There are three possibilities while balancing an account during a given period. It may be a debit balance or a credit balance or a nil balance depending upon the debit total and the credit total.

i. Debit Balance : The excess of debit total over the credit total is called the debit balance. When there is only debit entries in an account, the amount itself is the balance of that account, i.e., the debit balance. It is first recorded on the credit side, above the total. Then it is entered on the debit side, below the total, as the first item for the next period.

Dr.                                                                                       Cash Account                                                                                         Cr.

 

ii. Credit Balance : The excess of credit total over the debit total is called the credit balance. When there is only credit entries in an account, the amount itself is the balance of that account i.e., the credit balance. It is first written in the debit side, as the last item, above the total. Then it is recorded on the credit side, below the total, as the first item for the next period.

Dr.                                                                           Capital Account                                                                                            Cr.

 

 

iii. Nil Balance : When the total of debits and credits are equal, it is closed by merely writing the total on both the sides. It indicates the equality of benefits received and given by that account.

Dr.                                                                                       Shankar Account                                                                                    Cr.