Balance and interpret ledger accounts
Find a ledger account balance, use a running-balance layout and connect the result to the right financial statement.
Section 2.1 · The double entry system of book-keeping
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What is a ledger balance?
What you will learn
- Calculate a closing ledger balance from transactions
- Use a three-column running balance
- Interpret the balance without assuming that every debit is an expense
Calculate the balance from both sides
Add each side of a ledger account and compare the totals. The difference is the balance. An asset or expense often has a debit balance; a liability, owner's equity or income often has a credit balance.
For a balanced T-account, the balance carried down is entered on the smaller side so both sides total equally. It is then brought down on the opposite side for the next accounting period. A three-column running-balance account shows debit, credit and balance columns, updating the balance after each entry.
Interpret by account type
A debit balance in Bank represents a positive bank asset in the cash book. A credit balance on a supplier account usually represents an amount payable. A credit balance on a customer's account may indicate an overpayment, not a liability to that customer for a normal sale.
Balances are transferred to the financial statement or account appropriate to their type. Do not send every balance to the income statement: assets and liabilities appear in the statement of financial position, while income and expenses help calculate profit or loss.
Pause and explain
A bank account in the ledger has debits of $2,300 and credits of $1,850. What is its balance?
Worked example
A customer's account is debited $700, credited $250 for a receipt and credited $50 for a returns adjustment. Find the closing balance and explain it.
Show the worked solution
- Debit total = $700.
- Credit total = $250 + $50 = $300.
- Difference = $400 debit; it is an amount still receivable from the customer.
Answer The account has a $400 debit balance, so the customer still owes $400.
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Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A supplier account shows credit entries $800 and $120, and debit entries $500. Find the balance.
Give me a hint
Add each side first, then state which side is larger.
Compare my reasoning
- Credits total 800 + 120 = $920.
- Debits total $500.
- Credit balance = 920 − 500 = $420 payable.
The supplier account has a $420 credit balance; $420 remains payable.
Look for these in your work
- Side totals correct
- Difference correct
- Meaning stated
A three-column account begins with a $650 debit balance. The business receives a $210 payment from the customer and later invoices them $400. Find the running balances after each entry.
Give me a hint
A receipt reduces the receivable; a new credit sale increases it.
Compare my reasoning
- After receipt: 650 − 210 = $440 debit.
- After invoice: 440 + 400 = $840 debit.
- The $840 is the amount the customer owes after both transactions.
Running balances: $440 debit, then $840 debit.
Look for these in your work
- Receipt reduces balance
- Invoice increases balance
- Both running balances correct
A business has debit balances in Equipment $5,000, Bank $1,200 and Rent expense $300, and a credit balance in a bank loan $2,000. Identify which amounts normally help calculate profit and which appear as assets or liabilities.
Give me a hint
Classify each account before deciding where it is reported.
Compare my reasoning
- Rent expense is a period expense and helps calculate profit.
- Equipment and Bank are assets; the loan is a liability.
- Do not combine the asset and liability balances with the rent expense as if they were all expenses.
Rent expense $300 helps calculate profit. Equipment $5,000 and Bank $1,200 are assets; the $2,000 bank loan is a liability.
Look for these in your work
- Expense distinguished
- Assets classified
- Liability classified
Common mistakes
- Subtracting in the wrong direction
- Assuming every debit balance is an expense
- Confusing balance carried down with the account's transaction total
What can you explain now?
A supplier account has credits of $1,000 and debits of $760. What does the closing balance normally represent?
Compare with the explanation
$240 payable
The credit side is larger by $240, so the business still owes the supplier.
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Make it stick
How does a closing supplier balance differ from that account's total credit entries?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.