Accounts with balances that are the opposite of the normal balance are called contra accounts hence contra revenue accounts will have debit balances. The exceptions to this rule are the accounts Sales Returns, Sales Allowances, and Sales Discounts-these accounts have debit balances because they are reductions to sales. In a T-account, their balances will be on the right side.

These accounts normally have credit balances that are increased with a credit entry. Revenues and gains are recorded in accounts such as Sales, Service Revenues, Interest Revenues (or Interest Income), and Gain on Sale of Assets. On January 1, you should start with brand new balances to track next yearвЂ™s transactions.Confused? Send Feedback Revenues and Gains Are Usually Credited YouвЂ™re going to carry the balance from December 31 over into January 1, whereas for the temporary accounts, the December 31 balance will then be zeroed out at the end of the day. If you have a $100,000 in your account on December 31, then on January 1, when you open up, youвЂ™re not going to zero that account out, youвЂ™re going to start with a $100,000 the next year. The balances of these accounts we donвЂ™t zero out at the end of the year. The permanent accounts are our asset accounts, our liability accounts, and then our capital account. That doesnвЂ™t mean we get rid of the account, and it just means the balance is temporary.ДЄt the end of the year, we need to eliminate that account balance to start the year at zero, and then we track the new balance for that year.ДЄs for permanent accounts, these are accounts that generate the balance sheet accounts that do not go away in the closing process, unlike the temporary accounts. Every single year we want to know how much revenue we have for that year, how much revenue we have to the next year, so thatвЂ™s why itвЂ™s a temporary account. There are certain accounts, such as revenue accounts, expense accounts, and the withdrawals that are temporary.ДЄssume we have $25,000 in revenue this year, then next year, we want to start over at zero and start accumulating our revenue for the next year. LetвЂ™s first take a look at the temporary ones.ДЄccording to fundamental principles of accountancy, the term for temporary accounts means that they zero out as of the end of the closing process so that we can start the next period. Permanent and Temporary AccountsД®very account is either permanent or temporary, for the most part. The balance b/f is going below the totals of the account. Any difference of the totals is then written on that line as the balance c/f. Next, the higher total is inserted as the total of both columns, leaving a line above totals to add the extra entry on the lower side. The first step is the calculation of the totals of the debit and credit sides. The process of balancing off in this table is similar to the previous example. The term for it is the balance b/f (brought forward)

That amount of the balance c/f should be written in the column with the greater total.

This is to be the balance c/f (carried forward)

Enter it in the column of the ledger with the smaller amount, so that both sides are made equal.

Figure out any discrepancies between the two columns.

Calculate the total figures in both columns of the ledger account.

In a case of more than one entry, you should follow some procedures as described below: We add up all the entries to make sure the totals of the ledger account balance. This procedure can be straightforward if we are dealing with one type of entry.

Similarly, if the credit has a higher amount, it means the account has a credit balance. If the debit consists of the larger figure, the balance is called a debit balance. In case amounts do not match, you should put the difference in the column with a lesser amount. It represents the amount that is the same in both columns of an account. What does it mean? Balancing off means matching figures of debits and credits of the account. You can do this after all the financial data has been posted to the ledger accounts. One of the steps in the accounting cycle is balancing off the accounts.

Debit credit and balance account