Balancing of different accounts
Balancing is done once in a while, i.e., weekly, monthly, quarterly, half yearly or yearly, depending on the necessities of the business.
Personal Accounts: These accounts are usually balanced commonly to know the amounts due to the persons (creditors) or due from the persons (debtors).
Real Accounts: These accounts are usually balanced at the end of the fiscal year when final accounts are being organized. However, cash account is often balanced to know the cash on hand. A debit balance in an asset account indicated the value of the asset owned by the business. Assets accounts always demonstrate debit balances.
Nominal Accounts: These accounts are in fact, not to be balanced as they are to be closed by transfer to final accounts. A debit balance in a nominal account indicates that it is an expense or loss. A credit balance in a nominal account indicates that it is an income or gain.
All such balances in personal and real accounts are shown in the Balance Sheet and the balances in nominal accounts are taken to the Profit and Loss Account.
