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Ledger Posting of Opening Journal Entry


Opening Journal entry as we know is passed to bring the previous year’s closing balances of assets and liabilities to the current year. While making ledger accounts of assets and liabilities appearing in the opening journal entry opening balances as represented in the journal entry must be shown in the beginning of the ledger account as ‘To Balance b/d’ at the debit side for assets and ‘By Balance b/d’ at the credit side of liabilities. Remaining posting in the concerned Ale will be made as usual.

Ledger accounts are categorized as assets, liabilities, capital, revenue and expenses according to modern American approach. The first three of them i.e., assets, liabilities and capital account have certain closing balance at the end of accounting period, so their values are to be carried forward to the next accounting period. This is why they are closed as ‘By Balance c/d’ or ‘To Balance c/d’. In the previous ledger accounts, cash account, capital account, furniture and Ram’s account have been closed in this way. The balances of these accounts are carried forward to the next accounting period, because the firm has to carry on its business with these assets liabilities and capital in hand. While closing these accounts we write the word ‘Balance c/d’ to show the closing balance of the account. We can write c/d both at the debit or credit s ide, while closing personal and real accounts, c/d here means carried down to the next period. We can also use the word c/f which means carried forward or do which means carried over. All these words c/d or elf or c/o are synonymous and carry the same meaning. It should be noted once more that the word c/d is not restricted to the debit or credit side. It can be used on both the debit and credit side.

The closing balance of the previous period i.e., balance c/d is brought forward to the next accounting period as balance b/d, which means brought down from the previous period. We can also use the word b/f, meaning brought forward or b/o which mean~ brought over. These words i.e., b/d orb/for b/o can be used both at the debit or credit side of personal and real accounts to show the opening balance of the account.

While closing nominal accounts or those accounts which are either an expense or revenue, we do not use the word balance c/d because the balance of these accounts need not be carried forward to the next period. Whatever has been paid on account of expenses has been paid once and forever. This is the expense of the business, so it should be directly posted to the debit side of the profit and loss account or trading account. In the same way, accounts relating to income or gain or revenues are also closed by transfer to profit and loss account. Receipts i.e., rent, interest and discount are revenue of the business, so while closing these accounts their balance will be transferred to profit and loss account. That is why; rent, discount and salaries accounts in the example have been closed by transfer to profit and loss account.

It should be noted that outstanding or prepaid expenses accounts and accrued or unearned Income Accounts are Representative Personal Accounts. That is why, these accounts are closed as Balance c/d.