balancing an account

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Balancing an Account

Author: leigh-woodard

Post on 01-Jan-2016

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Balancing an Account. Some accounts are called “T” accounts because they are shaped like a capital “T”. Money received by the household (or business) is entered on the left hand side or “debit” side of the account. - PowerPoint PPT Presentation

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  • Balancing an Account

  • Some accounts are called T accounts because they are shaped like a capital T

  • Money received by the household (or business) is entered on the left hand side or debit side of the account

  • Money paid by the household (or business) is entered on the right-hand side or credit side of the account

  • At the end of each week/month, the household (or business) needs to balance the account to see how much money it has left (or how much money it owes)

    In the previous example, the household had earned 850 (wages and lotto win) and spent 165 (groceries and petrol)

  • Which side is bigger?

  • Which side is bigger? CR165

    DR850

  • To balance the account we firstly need to make both sides equalWhat can we add to 165 to make it equal to 850?The answer (850 165 = 685) is called the balance

  • DRCR

    850 165 + 685 = 850

  • To make both sides equal, we add the balance to the smaller side (in this case, the credit side)

  • Next, total both sides up. Both sides should now be equal, as they both contain 850. Be sure to total them both on the same line and then double underline the totals in red pen

  • Finally, bring the balance down below the total on the larger side (in this case, the debit side). This shows how much money is left in the account at the beginning of the next week or month

  • SummaryTotal both sides on a sheet of paperTake the smaller side from the bigger side and call the answer balanceEnter the balance onto the smaller sideTotal both sides in the account, making sure the total is on the same line on both sides and is double-underlined with a red penBring the balance down below the total on the bigger side

  • ReviewWhich side does money received by the household/business appear on?Which side does money paid by the business appear on?What is the name used to describe the difference between both sides?NOW do some examples from your textbook