C hapter 6: The double entry system:

Closing balances
Contents of chapter
This chapter shows how to balance off accounts. It also shows the accounts displayed in the three-column style.
This would be normal for accounts produced on computers.

Notes for teachers

Students should be aware of the difference between month-end closing and year-end closing.
1

2 The steps for balancing off an account at month-end closing and year-end closing are shown on p. 51 and
p. 54, respectively.

Students should be reminded that, in a year-end closing, the steps used for closing asset, liability and
3
capital accounts are different from those for closing revenue and expenses accounts. The latter would be
closed without balances carried forward to the next accounting year.

The totals on both sides of the account should always be shown with double lines underneath the figures.
4

The three-column style ledger accounts should be covered. It will be useful when bank reconciliation
5
statements are studied in Chapter 17.

Students should see that:

6
Closing balance Opening balance
=
for last month/last year for next month/next year

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 Answers to MCQs and exercises
6.1 C 6.2 C 6.3 B 6.4 C 6.5 A

6.6
H Ho K Luk
$ $ $ $
(1) Sales 690 (10) Returns inwards 40 (1) Sales 420 (10) Returns inwards 20
(4) Sales 66 (24) Cash 300 (20) Bank 400
(31) Balance c/d 416 420 420
756 756
L Mee
(1) Balance b/d 416
$ $
T Ming (4) Sales 418 (31) Balance c/d 621
(31) Sales 203
$ $
(1) Sales 153 (18) Bank 153 621 621
(1) Balance b/d 621

6.7X
H Ho
Dr Cr Balance
20X6 $ $ $
May 1 Sales 690 690 Dr
" 4 Sales 66 756 Dr
" 10 Returns inwards 40 716 Dr
" 24 Cash 300 416 Dr

T Ming
Dr Cr Balance
20X6 $ $ $
May 1 Sales 153 153 Dr
" 18 Bank 153 0

K Luk
Dr Cr Balance
20X6 $ $ $
May 1 Sales 420 420 Dr
" 10 Returns inwards 20 400 Dr
" 20 Bank 400 0

L Mee
Dr Cr Balance
20X6 $ $ $
May 4 Sales 418 418 Dr
" 31 Sales 203 621 Dr

6.8
H Wing Y Ming
$ $ $ $
(1) Sales 458 (24) Bank 300 (1) Sales 235 (12) Returns inwards 26
(28) Cash 100 (8) Sales 444 (30) Balance c/d 653
(30) Balance c/d 58 679 679
458 458
(1) Balance b/d 653
(1) Balance b/d 58
20
 Good Fortune Co K Oi
$ $ $ $
(1) Sales 98 (12) Returns inwards 9 (30) Balance c/d 65 (2) Purchases 65
(30) Balance c/d 89 (1) Balance b/d 65
98 98
(1) Balance b/d 89 T Fung
$ $
A Wong (8) Sales 249 (30) Bank 249
$ $
(20) Bank 77 (2) Purchases 77 Ocean Products
$ $
H Sang (17) Returns outwards 12 (10) Purchases 222
(26) Cash 210
$ $
(17) Returns outwards 24 (2) Purchases 231 222 222
(30) Balance c/d 219 (10) Purchases 12
243 243 Debtors: H Wing, Y Ming and Good Fortune Co
Creditors: H Sang and K Oi
(1) Balance b/d 219

6.9X
M San H Tung
20X5 $ 20X5 $ 20X5 $ 20X5 $
May 10 Returns outwards 19 May 1 Purchases 249 May 19 Bank 570 May 1 Purchases 260
" 22 Returns outwards 14 " 31 Balance c/d 665 " 4 Purchases 55
" 31 Balance c/d 216 " 12 Purchases 255
249 249 " 28 Purchases 665
1,235 1,235
Jun 1 Balance b/d 216
Jun 1 Balance b/d 665
Better Goods Co
20X5 $ 20X5 $ L Chin
May 10 Returns outwards 15 May 1 Purchases 188 20X5 $ 20X5 $
" 31 Cash 125 " 4 Purchases 77 May 31 Balance c/d 62 May 1 Purchases 62
" 31 Balance c/d 469 " 12 Purchases 278
Jun 1 Balance b/d 62
" 28 Purchases 66
609 609
L Ming
Jun 1 Balance b/d 469 20X5 $ 20X5 $
May 7 Bank 100 May 4 Purchases 100

6.10X
H Fung J Long
20X7 $ 20X7 $ 20X7 $ 20X7 $
May 1 Sales 241 May 19 Bank 241 May 1 Sales 887 May 10 Returns inwards 17
" 21 Sales 44 " 31 Balance c/d 44 " 8 Sales 132 " 19 Bank 500
285 285 " 31 Balance c/d 502
1,019 1,019
Jun 1 Balance b/d 44
Jun 1 Balance b/d 502
S Kwok
20X7 $ 20X7 $ T Fook
May 1 Sales 29 May 31 Balance c/d 383 20X7 $ 20X7 $
" 8 Sales 74 May 1 Sales 124 May 10 Returns inwards 44
" 21 Sales 280 " 12 Cash 80
383 383 124 124
Jun 1 Balance b/d 383
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 S Wong Y Hoi
20X7 $ 20X7 $ 20X7 $ 20X7 $
May 15 Returns outwards 8 May 2 Purchases 148 May 15 Returns outwards 18 May 2 Purchases 108
" 28 Bank 140 " 28 Bank 50 " 9 Purchases 44
148 148 " 31 Returns outwards 4
" 31 Balance c/d 80
152 152
T Dah
20X7 $ 20X7 $ Jun 1 Balance b/d 80
May 31 Balance c/d 169 May 2 Purchases 27
" 9 Purchases 142 Debtors: H Fung, S Kwok and J Long.
169 169 Creditors: T Dah, S Jin and Y Hoi.

Jun 1 Balance b/d 169

S Jin
20X7 $ 20X7 $
May 28 Bank 60 May 2 Purchases 77
" 31 Balance c/d 17
77 77
Jun 1 Balance b/d 17

6.11X
H Fung S Wong
Dr Cr Balance Dr Cr Balance
20X7 $ $ $ 20X7 $ $ $
May 1 Sales 241 241 Dr May 2 Purchases 148 148 Cr
" 19 Bank 241 0 " 15 Returns outwards 8 140 Cr
" 21 Sales 44 44 Dr " 28 Bank 140 0

S Kwok T Dah
Dr Cr Balance Dr Cr Balance
20X7 $ $ $ 20X7 $ $ $
May 1 Sales 29 29 Dr May 2 Purchases 27 27 Cr
" 8 Sales 74 103 Dr " 9 Purchases 142 169 Cr
" 21 Sales 280 383 Dr
S Jin
J Long Dr Cr Balance
Dr Cr Balance 20X7 $ $ $
20X7 $ $ $ May 2 Purchases 77 77 Cr
May 1 Sales 887 887 Dr " 28 Bank 60 17 Cr
" 8 Sales 132 1,019 Dr
" 10 Returns inwards 17 1,002 Dr Y Hoi
" 19 Bank 500 502 Dr
Dr Cr Balance
20X7 $ $ $
T Fook May 2 Purchases 108 108 Cr
Dr Cr Balance " 9 Purchases 44 152 Cr
20X7 $ $ $ " 15 Returns outwards 18 134 Cr
May 1 Sales 124 124 Dr " 28 Bank 50 84 Cr
" 10 Returns inwards 44 80 Dr " 31 Returns outwards 4 80 Cr
" 12 Cash 80 0

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