Posting as Opening Entry
As discussed earlier, all assets will show a debit balance. Such accounts will be opened and the relevant amount will be written on the debit side as ‘To Balance brought down (b/d)’. On the contrary, the account of liabilities show credit balance. An account for each liability will be opened and the relevant amount will be written on the credit side as ‘By Balance brought down (b/d)’.
Illustration 18. Pass the Opening Entry on 1st April, 2012 on the basis of the following information taken from the books of Mr. Ashok. Also, post the opening entry:
Solution:
Note: The excess of assets over liabilities is the proprietor’s capital and is credited to his Capital Account.
Ledger of Mr. Ashok
Use of the words ‘To’ and ‘By’: It is customary to use the word ‘To’ with accounts which appear on the debit side of a Ledger Account. Similarly, the word ‘By’ is used with accounts which appear on the credit side of a Ledger Account. The words ‘To’ and ‘By’ do not have any specific meaning. Modern accountants, therefore, ignore the use of these words.
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