Balancing off accountsBalancing off accountsBalancing off accountsBalancing off accounts
DBS3024 BUSINESS TRANSACTIONDBS30...
Today’s OverviewToday’s Overview
1 - 3
Learning objectivesLearning objectives
After this lecture, you should be able to:After this lecture, you should be a...
1 - 4
Why balance accounts?Why balance accounts?
T-accountsT-accounts need to be balancedneed to be balanced
at various ti...
1 - 5
11
Debtors accountDebtors account
1 - 6
How to balance whereHow to balance where debtorsdebtors
have paid their accountshave paid their accounts
This is the...
1 - 7
How to balance where debtors haveHow to balance where debtors have
paid their accounts (Continued)paid their account...
1 - 8
How to balance whereHow to balance where
debtors still owe for goodsdebtors still owe for goods
This is the account ...
1 - 9
How to balanceHow to balance where debtorswhere debtors
still owe for goodsstill owe for goods (Continued)(Continued...
1 - 10
How to balanceHow to balance where debtorswhere debtors
still owe for goodsstill owe for goods (Continued)(Continue...
1 - 11
How to balance whereHow to balance where debtorsdebtors
still owe for goodsstill owe for goods (Continued)(Continue...
1 - 12
22
Creditors accountCreditors account
1 - 13
Balancing aBalancing a creditor’s accountcreditor’s account
This is the account of E. Williams inThis is the accoun...
1 - 14
Balancing aBalancing a creditor’screditor’s
accountaccount (Continued)(Continued)
This is the balanced account:This...
1 - 15
33
Three Column accountsThree Column accounts
1 - 16
Three-column accountsThree-column accounts
 Three-column accountsThree-column accounts do not use thedo not use th...
1 - 17
An example of a three-columnAn example of a three-column
accountaccount
1 - 18
Learning outcomesLearning outcomes
You should have now learned:You should have now learned:
1.1. How toHow to close...
1 - 19
Learning outcomes (Continued)Learning outcomes (Continued)
4.4. That when an opening balance on anThat when an open...
1 - 20
Learning outcomes (Continued)Learning outcomes (Continued)
6.6. ThatThat ‘debtors’‘debtors’ are people or organisat...
1 - 21
Learning outcomes (Continued)Learning outcomes (Continued)
8.8. That T-account and three-columnThat T-account and t...
Resources : Core ReadingResources : Core Reading
 Wood, Frank and Robinson, SheilaWood, Frank and Robinson, Sheila
(2009)...
QUESTIONS?QUESTIONS?
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Dbs1034 biz trx week 9 balancing off accounts

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Balancing accounts

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Dbs1034 biz trx week 9 balancing off accounts

  1. 1. Balancing off accountsBalancing off accountsBalancing off accountsBalancing off accounts DBS3024 BUSINESS TRANSACTIONDBS3024 BUSINESS TRANSACTION by Stephen Ong Visiting Fellow, Birmingham City University Business School Visiting Professor, Shenzhen University
  2. 2. Today’s OverviewToday’s Overview
  3. 3. 1 - 3 Learning objectivesLearning objectives After this lecture, you should be able to:After this lecture, you should be able to:  Close-off accounts when appropriateClose-off accounts when appropriate  Balance-off accounts at the end of aBalance-off accounts at the end of a period and bring down the openingperiod and bring down the opening balance to the next periodbalance to the next period  Distinguish between a debit balanceDistinguish between a debit balance and a credit balanceand a credit balance  Describe and prepare accounts inDescribe and prepare accounts in three-column formatthree-column format
  4. 4. 1 - 4 Why balance accounts?Why balance accounts? T-accountsT-accounts need to be balancedneed to be balanced at various times during the year:at various times during the year:  At theAt the end of each accountingend of each accounting periodperiod to summarise theto summarise the situation.situation.  Once a yearOnce a year to calculate profit.to calculate profit.  To seeTo see what is happeningwhat is happening withwith respect to a particular account.respect to a particular account.
  5. 5. 1 - 5 11 Debtors accountDebtors account
  6. 6. 1 - 6 How to balance whereHow to balance where debtorsdebtors have paid their accountshave paid their accounts This is the account of K. Tandy inThis is the account of K. Tandy in August 2012:August 2012:
  7. 7. 1 - 7 How to balance where debtors haveHow to balance where debtors have paid their accounts (Continued)paid their accounts (Continued) This is the balanced account:This is the balanced account:
  8. 8. 1 - 8 How to balance whereHow to balance where debtors still owe for goodsdebtors still owe for goods This is the account of D. Knight inThis is the account of D. Knight in August 2012:August 2012:
  9. 9. 1 - 9 How to balanceHow to balance where debtorswhere debtors still owe for goodsstill owe for goods (Continued)(Continued) To balance, we will use a five-stepTo balance, we will use a five-step approach.approach. 1.1. Add up both sides to find out theirAdd up both sides to find out their totalstotals. Note: do not write anything in. Note: do not write anything in the account at this stage.the account at this stage. 2.2. Deduct the smaller total from the largerDeduct the smaller total from the larger total tototal to find the balancefind the balance.. 3.3. Now enter theNow enter the balance on the side withbalance on the side with the smallest totalthe smallest total. This now means the. This now means the totals will be equal.totals will be equal.
  10. 10. 1 - 10 How to balanceHow to balance where debtorswhere debtors still owe for goodsstill owe for goods (Continued)(Continued) 4.4. EnterEnter totals leveltotals level with eachwith each other.other. 5.5. Now enter the balance onNow enter the balance on the line below the totals onthe line below the totals on thethe oppositeopposite sideside to theto the balance shown above thebalance shown above the totals.totals.
  11. 11. 1 - 11 How to balance whereHow to balance where debtorsdebtors still owe for goodsstill owe for goods (Continued)(Continued) This is the balanced account:This is the balanced account:
  12. 12. 1 - 12 22 Creditors accountCreditors account
  13. 13. 1 - 13 Balancing aBalancing a creditor’s accountcreditor’s account This is the account of E. Williams inThis is the account of E. Williams in August 2012:August 2012:
  14. 14. 1 - 14 Balancing aBalancing a creditor’screditor’s accountaccount (Continued)(Continued) This is the balanced account:This is the balanced account:
  15. 15. 1 - 15 33 Three Column accountsThree Column accounts
  16. 16. 1 - 16 Three-column accountsThree-column accounts  Three-column accountsThree-column accounts do not use thedo not use the format of the T-account.format of the T-account.  There are three columns and theThere are three columns and the thirdthird column provides a running totalcolumn provides a running total of theof the balance.balance.  Three-column accounts are veryThree-column accounts are very similar to the bank statementsimilar to the bank statement you willyou will receive for a current account.receive for a current account.
  17. 17. 1 - 17 An example of a three-columnAn example of a three-column accountaccount
  18. 18. 1 - 18 Learning outcomesLearning outcomes You should have now learned:You should have now learned: 1.1. How toHow to close off accountsclose off accounts upon whichupon which there is no balance outstandingthere is no balance outstanding 2.2. How to balance-off accounts at theHow to balance-off accounts at the endend of a periodof a period 3.3. How toHow to bring down the openingbring down the opening balancebalance on an account at the start of aon an account at the start of a new periodnew period
  19. 19. 1 - 19 Learning outcomes (Continued)Learning outcomes (Continued) 4.4. That when an opening balance on anThat when an opening balance on an account is a debit, that account is said toaccount is a debit, that account is said to have ahave a debit balancedebit balance. It also has a debit. It also has a debit balance during a period whenever the totalbalance during a period whenever the total of the debit side exceeds the total of theof the debit side exceeds the total of the credit sidecredit side 5.5. That when an opening balance on anThat when an opening balance on an account is a credit, that account is said toaccount is a credit, that account is said to have ahave a credit balancecredit balance. It also has a credit. It also has a credit balance during a period whenever the totalbalance during a period whenever the total of the credit side exceeds the total of theof the credit side exceeds the total of the debit sidedebit side
  20. 20. 1 - 20 Learning outcomes (Continued)Learning outcomes (Continued) 6.6. ThatThat ‘debtors’‘debtors’ are people or organisationsare people or organisations whose account in your accounting bookswhose account in your accounting books has ahas a greater value on the debit sidegreater value on the debit side. They. They owe you money. They are included in theowe you money. They are included in the amount shown foramount shown for accounts receivableaccounts receivable inin the statement of financial positionthe statement of financial position 7.7. ThatThat ‘creditors’‘creditors’ are people or organisationsare people or organisations whose account in your accounting bookswhose account in your accounting books has ahas a greater value on the credit sidegreater value on the credit side. You. You owe them money. They are included in theowe them money. They are included in the amount shown foramount shown for accounts payableaccounts payable in thein the statement of financial positionstatement of financial position
  21. 21. 1 - 21 Learning outcomes (Continued)Learning outcomes (Continued) 8.8. That T-account and three-columnThat T-account and three-column accounts disclose theaccounts disclose the same balancesame balance,, given identical information aboutgiven identical information about transactionstransactions 9.9. That three-column accounts updateThat three-column accounts update and show the balance on the accountand show the balance on the account afterafter every transactionevery transaction 10.10.How to prepare three-columnHow to prepare three-column accountsaccounts
  22. 22. Resources : Core ReadingResources : Core Reading  Wood, Frank and Robinson, SheilaWood, Frank and Robinson, Sheila (2009)(2009) Bookkeeping and AccountsBookkeeping and Accounts ,7,7thth Edition, Pearson/ FT Prentice HallEdition, Pearson/ FT Prentice Hall  Wood, Frank and Sangster, Alan (2012) Business Accounting ,12th Edition, Pearson/ FT Prentice Hall  Fortes, Hilary (2011) Accounting Simplified , Pearson/ FT Prentice Hall
  23. 23. QUESTIONS?QUESTIONS?

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