What does ending balance mean? What is a balance in accounting? Using balances in accounts of accounting value
Balance- this is the difference between debit and credit turnover on a separate account.
Account balance
This is the difference between the debit and credit entries in the account at the end of the reporting period. Applies to many related accounts, such as those of banks, credit card companies, brokerage firms and large stores, and is also used in the accounting system. The same account may have a debit or credit net balance, depending on which party to the transaction you are.
Debit balance
This is the balance of the client’s funds as a debit to the bank account. Serves as an indicator of the client’s need to raise additional funds. The client is allowed to have a debit balance on his current account with credit institutions in the form of an overdraft, when, without opening a new current account, he receives the right to additional payment for settlement documents at the expense of the bank’s resources.
These agreements stipulate the maximum amount of the debit balance (debt limit), the period and procedure for reporting on reporting dates. The presence of a debit balance in active bank accounts indicates the normal state of business in the bank.
Credit balance
1) an accounting term meaning the excess of the total amounts on the credit of an account in comparison with the debit. It is shown, as a rule, in the liability side of the balance sheet;
2) in exchange transactions: debt of a broker or dealer to a client.
Negative balance
A negative, red balance means an excess of expenses over receipts.
Positive balance
A positive balance means the excess of revenues over costs.
Synonyms
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Debriefing during accounting is an important matter and it is impossible to imagine any business without it. And it’s good if a specially hired accountant handles the reporting, but not everyone can afford the services of a specialist. Therefore, you have to deal with the paperwork yourself. You can deal with debits and credits without any problems, but the unfamiliar and curious word “balance” causes bewilderment. What kind of animal is this - balance - and what is it responsible for?
What is a balance?
Balance is a word of Italian origin, which in accounting refers to the difference between the income and expenses of an economic institution for a certain period. The balance can be negative or positive.
In theoretical manuscripts you can read a lot of varied information about this phenomenon in accounting. But in reality the devil is not as scary as he is portrayed. Most often, the analysis does not take reporting for the entire period, but, for example, for a month or quarter.
Debit and credit balance
The debit balance is an assessment of the available economic capacity in a certain time period. Information about it usually refers to the assets of the enterprise. The credit balance, in turn, is a source of information about where these economic capacities came from to the enterprise, how much was paid for them, and so on. Such information relates to the liabilities of the enterprise.
If there is no credit balance, that is, debit and credit are zero, then the economic transaction is considered closed. Derivatives of the word “accounting” often appear in this article, but the concept of balance is also found in other areas of the economy - stock markets and during trade transactions.
If we are talking about the balance as a criterion for assessing foreign trade operations, then the amounts of exports and imports will be compared with each other. If the balance is positive, then we can conclude that exports exceeded imports and vice versa.
Let's repeat it again, in simple words. Balance is the difference between receipts and expenses. This indicator can be calculated both when analyzing one trade transaction and the economic activity of an enterprise or state as a whole. If the balance is positive, then income exceeds expenses. If negative, then the situation is the opposite of the previous one. It is not uncommon for the balance to be reduced to zero, and if you have been involved in accounting, then the joke about how debit and credit came together is already familiar to you.
Accounting policy
Double Entry Posting
Debit = Credit Asset = Liability
Cost calculation
RAS USAS IFRS GAAP
- Debit balance(debit is greater than credit) reflects the state of this type of economic assets on a certain date and is shown in the asset balance sheet.
- Credit balance(credit is greater than debit) reflects the state of sources of economic funds and is shown in liabilities.
If the account has no balance ( balance is zero), then such an account is called closed. In accounting, some accounts may have both a debit and a credit balance at the same time.
In practice, not the entire history of an accounting account is often analyzed, but only a certain period of time, for example, the last month. For these purposes, the following are distinguished:
- Initial balance(incoming) - account balance at the beginning of the period. Calculated based on previous transactions.
- Debit and credit turnover for the period- calculated on the basis of transactions only for the period under review.
- Balance for the period- the total result of operations for the period under review.
- Final balance(outgoing) - account balance at the end of the period. Usually calculated as the arithmetic sum of the opening balance and turnover for the period.
In foreign trade relations
When characterizing foreign trade relations, they often consider the amount of exports and imports over a period, for example, over a year. In this case, the following are distinguished:
- Trade balance- the difference between the cost of exports and imports. Positive trade balance means an excess of exports over imports (the country sells more than it buys). Negative trade balance- excess of imports over exports (the country buys more than it sells). In world practice, it is generally accepted that a negative balance is a bad trend, since excessive imports contribute to flooding the market with imported goods, infringing on the interests of domestic producers. The International Monetary Fund, in its recommendations and conditions for issuing loans, indicates the need and benefit for the economy to have a positive trade balance. At the same time, for several years in a row the United States has had a negative balance of several tens of billions of dollars. At the same time, living conditions in the United States served as a standard of well-being for others.
- Balance of payments balance- the difference between receipts from abroad and payments abroad. Positive balance of payments means the excess of all payments coming into a country from abroad over payments from a given country to another. Negative balance of payments- the excess of payments from the country over payments to the country. Typically, international payments are made in the most convertible currency, such as US dollars or euros. A negative balance of payments gradually reduces the country's foreign exchange reserves. It needs to be replenished by selling goods for foreign currency or obtaining stabilization loans. But this does not happen if payments are made in the national currency of the state. Thus, the United States can simply issue (“reprint”) the required number of dollars to cover the negative balance. This will not necessarily be a direct money issue. There are quite a few options for “credit” money. But this is only possible within the banking system of the country to which this money belongs.
In 2007, Russia was preparing for the gradual transfer of foreign trade in its goods for rubles: then foreign economic partners would have a need for rubles, which meant the emergence of the opportunity to buy significant volumes of imports also for rubles and/or issue international ruble loans. Unfortunately, the global crisis of 2008 put an end to these plans.
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2010.:Synonyms
See what “Balance” is in other dictionaries: - (Italian, this, see balance). Balance due upon closing of accounts; state of an account. Dictionary of foreign words included in the Russian language. Chudinov A.N., 1910. BALANCE [it. saldo calculation, balance] econ. in foreign trade:… …
Dictionary of foreign words of the Russian language
Balance Modern encyclopedia - (from Italian saldo calculation, payment, balance; English amount of balance, net balance) in accounting, the difference between cash receipts and expenses for a certain period of time, the difference in the total amounts of debit and credit. Credit balance... ...
Accounting Encyclopedia balance - The difference between cash receipts and expenses for a certain period of time; in international trade and payment settlements, the difference between the value of a country’s exports and imports (trade balance) or between its foreign... ...
Balance Technical Translator's Guide - (Italian saldo calculation, balance), 1) in accounting, the difference between the totals of entries in the debit and credit of accounts. 2) In bilateral foreign trade relations, the balance is the difference between the value of exports and imports (trade balance).… …
- (Italian saldo calculation balance), 1) in accounting, the difference between the totals of entries in the debit and credit of accounts. The debit balance (debit is greater than credit) reflects the state of this type of economic assets on a certain date and is shown in ... ... Big Encyclopedic Dictionary
- (from Italian saldo calculation, balance) 1) the difference between cash receipts and expenses of a company or enterprise for a certain period of time; difference between cost. exports and imports of the country (trade balance), between payments for... ... Economic dictionary
A. The difference between financial receipts and expenses for a certain period of time. B. The difference between the value of a country's exports and imports (trade balance). B. The difference between foreign payments and receipts (balance... ... Dictionary of business terms
Balance is an accounting term that denotes the difference between the receipt of funds and their expenditure for a certain period. Term Accounting Encyclopedia can be applied not only in the field of corporate finance, but, for example, also in relation to international trade.
Balance and credit
In accounting, the balance is understood as the difference between the total amounts of all debit and credit entries of the enterprise budget. The balance is calculated monthly on the first day:
- If the debit amount is higher than the credit amount, the balance is considered debit and reflects the amount of cash available to the company.
- If credit prevails over debit, the balance credit– it characterizes the state of sources of economic funds.
A situation is rarely possible when the debit and credit of the budget are equal - in this case we talk about closed balance.
This classification of the balance sheet is not the only one. There are also:
- Active and passive balance. A surplus balance is considered when the funds received into the account exceed the amount debited from it. On the contrary, if income is less than expenses, they speak of a passive balance. Although the difference can be either positive or negative, in any case the result is recorded with a plus sign. This is due to the use of the principle double entry.
- Opening and closing balance. The accountant produces for a certain period. The budget balance at the beginning of the analyzed period, formed from previous operations, is called incoming balance. As a result of the analysis of the movement of funds for the period, a final balance.
In accounting, it is mandatory to use a special term to denote the balance of an accounting account.
The very concept of balance (C-to) is the difference between two indicators - debit (Dt) and credit (Ct).
Sometimes this balance can be a debit balance, and sometimes a credit balance. It is calculated for a certain period of time.
Moreover, it can become positive or negative.
Thanks to account balances, you can understand what the organization’s financial “well-being” is and the general state of affairs.
Indicator – “debit C-to”
This means that Dt is in some way greater than the value of Kt. And the state of the account itself in this case is shown in the balance sheet asset. It is calculated for a certain date and characterizes the state of various funds of the entity conducting a particular economic activity. It is typical for active accounts in which receipts are displayed according to Dt, and expenditures - according to Kt.
Indicator – “credit C-to”
When summing up, it turns out that Kt is greater than the value of Dt. And the account balance itself is displayed exclusively in the liability side of the balance sheet. It is a characteristic of passive accounts that are responsible for the sources of all funds. Passive accounts, as you know, have a C-to at the beginning or end of any period only for the loan. And the C-to itself at the end of a particular period is calculated by adding absolutely the entire turnover according to Kt to the initial C-to and the obligatory subtraction of debit amounts.
Indicator – “C-to equal to zero”
If the account has no balance, that is, the debit is equal to the credit, then C-do in this case is equal to zero. Another similar account is called closed.
Indicator – “initial C-to”
Using a special formula, the turnover for the month is added or subtracted to the amount of funds at the beginning of a certain period, and the final result is transferred to the beginning of the period. This is the initial account balance.
Indicator – “From to for the period”
It is important for an organization what account balances were in a particular period, for example, in a particular month or quarter. For this purpose, balances for the selected period are calculated and the required indicator is obtained.
Indicator – “C-to final”
The balance of funds in a particular account at the end of a certain period. In order to get it, you need to add all possible receipts on the account to the initial indicator and subtract all expenses.
In accounting, there are accounts that simultaneously have both debit and credit C-do. They use balances when conducting various reconciliations with counterparties, as well as to find out the results of the organization’s accounts.
At enterprises, the balance is calculated automatically using a computer program. For accounting, active, as well as passive and active-passive accounts are used. Accordingly, C-do is calculated using different methods. It is necessarily tied to a certain period, be it a month or a quarter.
Formula for calculating balance:
C-to (end) = C-to (beginning) +/- (D/revolution – K/revolution)
To calculate C-to for active-passive accounts, you need to add to the initial indicator the value of turnover, which is located on the same side as the primary C-to indicator. Moreover, a positive result will remain in the same part of the score, and a negative result will certainly move to the opposite side.
When working with a computer program, it is important to correctly determine the opening balance of accounts, which is taken from the primary documentation. The balances are entered into the program, and on their basis a balance of economic activities is formed.
C-to foreign trade relations
In this case, the difference between the values of imports or exports for a certain period is calculated. Usually they take a year for calculations.
Types of foreign trade balances:
- C-to trade balance.
- C-to balance of payments.
C-to trade balance, as is known, is a subtraction between the financial indicators of imports as well as exports. It can be both positive and negative. If exports turn out to be greater than imports, then in this case the power is in an advantageous position, because more goods are sold than they are bought. In addition, the products can compete freely in global markets due to their good quality.
A negative balance is a negative indicator of the state of the country's economy. Local producers are unable to meet the needs of the population with home-made products. A similar situation arises when the state does not have all the necessary mechanisms for business development. A negative balance often leads to a depreciation of the local currency, because the country is in an economic recession and the budget is not properly filled.
C-to balance of payments is the difference between the amounts of payments abroad and from abroad. Within the framework of cooperation between different countries, monetary settlements are always present. In the case when the state receives more money than it gives out, they speak of a positive balance. And if, on the contrary, you have to pay more to other countries than you receive, then there is a negative balance.
C-to state budget
This is the difference between all income and the amount of budget expenses. In the case when expenses are greater than the revenue side, there is a budget deficit, and the balance itself is negative. And in the case when income is greater than the amount of expenses, then the country has a budget surplus and the balance is a positive value.