• Calculate the account balance

 

As we post, we continually update account balances. Here are the first two accounts in our general ledger. If this was an old-fashioned book ledger, each of these accounts would be a different page (or pages, when there are a lot of transactions posted):

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	1		GJ1	20,000.00		20,000.00
Oct	4		GJ1		12,000.00	8,000.00
Oct	15		GJ1	1,500.00		9,500.00
Oct	25		GJ1		2,600.00	6,900.00
Oct	26		GJ1		1,000.00	5,900.00
Oct	30		GJ2	1,600.00		7,500.00
Oct	31		GJ2		4,000.00	3,500.00[1]

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	20		GJ1	7,250.00		7,250.00
Oct	30		GJ2		1,600.00	5,650.00

One particular journal entry has been highlighted so you can see how it is posted and how the ledger entry can be traced back to the journal:

JournalPage 2

Date	Description	Post. Ref.	Debit	Credit
20–
Oct. 30	Checking	110	1,600.00
Oct. 30	Accounts Receivable	120		1,600.00
Oct. 30	To record receipt of payments from customers on account

In the journal, we have noted the account number we posted to.

In the ledger, we noted the journal (General Journal) and the page. We’re not using special journals, but they would be noted appropriately. Examples of special journals could include a Sales Journal (SJ), Purchasing Journal (PJ), Cash Receipts Journal (CRJ), Cash Disbursements Journal (CDJ), Payroll Journal (PRJ), and so on.

Also, note that the beginning balance, even though it is a zero, is in the debit column, because both of these accounts are asset accounts, which have a normal balance on the debit side. A credit balance in Accounts Receivable would mean that we owed all our customers’ money, which is a highly unlikely scenario, and a credit balance in the checking account would mean that withdrawals had exceeded deposits, meaning the account is overdrawn. Those scenarios would turn these accounts from assets to liabilities.

Now, look at the entries in Accounts Receivable:

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a			0.00
Oct	20		GJ1	7,250.00		7,250.00
Oct	30		GJ2		1,600.00	5,650.00

The balance on October 31 is a debit of $5,650.00, calculated as follows:

Beginning balance		$-
debit entry		7,250.00
credit entry		(1,600.00)
Ending balance		Single Line$5,650.00Double Line

We subtracted the credit, not because credits are negative or reductions, but because this is an asset account that is increased by debits and decreased by credits. Also note that in accounting, we often use parentheses to show a negative, and we use a single underline to show we are summing up a column of numbers, and a double underline to show that we are done (the “bottom line”).

Here is the fully posted Accounts Payable ledger page:

Date		Item	Post. Ref.	Debit	Credit	Balance
						Debit	Credit
20–
Oct	1	Balance	a				0.00
Oct	7		GJ1		2,600.00		2,600.00
Oct	26		GJ1	1,000.00			1,600.00

And how the balance is calculated:

Beginning balance		$-
debit entry		2,600.00
credit entry		(1,000.00)
Ending balance		Single Line$1,600.00Double Line

This is a liability account (something we owe) with a normal credit balance, so we subtract debits from credits to get the balance.

 

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