Balance is the account balance in the business accounting reported on a given day as the difference between the sums of the account pages. The balance of the account allows you to determine the status of the component registered in this account (eg inventory, cash in hand, balances with counterparties).
Depending on the type of account, the balance may be on the side (some accounts allow the balance to appear only on one side, eg accounts recording costs of basic activity, fixed assets, remission of fixed assets).
It is worth mentioning that with the term “balance” we also meet in the case of personal and company bank accounts. In this case, the balance determines the difference between account receipts and account charges. The available balance refers to the actual value of the funds in the account, and the current balance to the amount after posting the last executed operation. Importantly, the balance on your bank account does not update in real time. Often, the settlement of funds takes place within a few days.
Types of balances
First of all, the balances can be divided into the initial balance and the end balance:
initial balance (Sp.) – occurs at the beginning of a given period and concerns the initial state from the opening balance,
end balance (Sk.) – occurs at the end of a given period and relates to the final status from the closing balance. What is important, the final balance of a given period is also the initial balance from the next period.
Secondly, balances can be divided into the debit balance, credit balance and zero balance. This applies to both initial and final balances.
Debit balance – this type of balance is when the turnover on the side of “Winien” is greater than the turnover on the side “Ma”.
Credit balance – this type of balance is when the turnover on the side of “Ma” is greater than the turnover on the side “Winien”.
Zero balance – with this type of balance we have to do when there are the same amounts on the “Win” and “Ma” sides.
The impact of the double-entry rule on balances
Three guidelines are associated with the double-entry rule. They say that each accounting operation should be recorded in the following way:
– on two relevant accounts (or more in the case of compound operations,
– on opposite sides, i.e. “GE” and “MA”,
– the amount on both sides must be equal.
This means that the sum of debit balances (be it initial or final) of all accounts must be equal to the sum of credit balances of all accounts.