Steps To Extract Balances From A Ledger Account - SS1 Accounting Lesson Note
Extracting balances from a ledger account is a simple process that involves analyzing the transactions recorded in the account to determine the balance at a specific point in time for the purpose of for financial reporting and analysis.
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Identify the account you want to extract the balance from: The first step is to identify the ledger account you want to extract the balance from. This will typically be an account that is important for financial reporting, such as cash, accounts receivable, or inventory.
Review the account transactions: The next step is to review the transactions that have been recorded in the ledger account. This will give you an understanding of how the account has been affected over a period of time.
Determine the balance of the account: To determine the balance of the account, you need to add up all the transactions recorded in the account up to a specific date. For example, if you want to determine the balance of the account as of December 31st, you would add up all the transactions recorded in the account from the beginning of the fiscal year to December 31st.
Identify the account type: Once you have determined the balance of the account, you need to identify whether it has a debit or credit balance. Accounts that increase with a debit entry and decrease with a credit entry are considered to have a debit balance. Conversely, accounts that increase with a credit entry and decrease with a debit entry are considered to have a credit balance.