Accounting Cycle : Ledger — Important Questions

Debit Balance

Step 1: To find the balance, compare the totals of both sides of a Ledger account. Step 2: If Debit total > Credit total, the excess amount is the DEBIT BALANCE. Step 3: If Credit total > Debit total, the excess amount is the CREDIT BALANCE. Step 4: If both totals are equal, the balance is ZERO (the account is balanced). Step 5: The balance is always named after the side that is GREATER. So Debit side being greater means Debit Balance.

On the side which has the smaller total

Step 1: When balancing an account, we want both sides to show the same total. Step 2: The difference between the two sides is called the balance. Step 3: To make both sides equal, we write this balance (called 'Balance c/d') on the SMALLER side. Step 4: This brings the smaller side up to match the larger side's total. Step 5: In the next period, this balance is brought forward on the opposite side as 'Balance b/d'. Writing it on the larger side would increase the already larger total, making things worse.

Mohan's Account

Step 1: Accounts are of three types — Personal, Real, and Nominal. Step 2: Personal accounts are accounts of persons, firms, companies, or institutions — for example, Mohan's Account, Modern Textiles, Capital Account. Step 3: Cash Account is a Real Account (related to assets/money). Step 4: Purchases Account is a Real Account (related to goods). Step 5: Salaries Account is a Nominal Account (related to expenses). So Mohan's Account is the only Personal Account among the options.

Trading Account or Profit & Loss Account

Step 1: Nominal accounts record incomes, expenses, gains, and losses — they are temporary accounts. Step 2: At the end of the accounting period, they must be closed (their balance transferred elsewhere). Step 3: Expenses directly related to manufacturing/purchasing goods (like Wages) go to the Trading Account. Step 4: Other indirect expenses (like Salaries, General Expenses) and incomes (like Discount Received) go to the Profit & Loss Account. Step 5: Capital Account and Cash Account are not used for closing nominal accounts. Balance Sheet uses balances of assets and liabilities, not nominal a