A Level Accountancy – Why the balance carried forward changes sides
by Philip Greening-Jackson
Following on from the article on whether to close off an account to profit and loss or to post the existing balance to the balance sheet, one question I have been asked many times is “Why does the balance carried forward have to change sides?”
It seems strange, I suppose, but it is completely logical. Let’s look at the cash account. Cash must always be a debit balance. Well, it can be zero, but can never be a credit figure. Why is this? Simply put, all assets must be debits, cash is no exception and you cannot overspend cash! If you haven’t got it, you can’t spend it. So, the balance on the cash account must be a debit, in other words the debit side will always exceed the credit side. To make the account balance (i.e. both sides to be the same) you should insert a balance on the credit side. Think about it as if one foot is slightly bigger than the other. You must buy the larger shoes then put some cotton wool in the side where the foot is smaller.
Next to that entry you write “balance c/f” and carry it forward to the opposite side? Why? Because the reason you put it on the cr side is because the dr side was bigger. You want to start the new period with that figure on the dr side. That is the whole point of the operation.