## **Learning Outcomes**

After reading this article, you will be able to explain the structure and purpose of ledger accounts, identify how opening and closing balances are brought forward and carried forward, and prepare ledgers with correct balance b/f and c/f entries. You will also practise applying these concepts to typical exam tasks.

## **ACCA Recording Financial Transactions (FA1) Syllabus**

For ACCA Recording Financial Transactions (FA1), you are required to understand how transactions are recorded in ledgers and how balances are treated at period-end and period-beginning. In this article, focus your revision on:

- The purpose and format of ledger accounts
- How and when to bring forward (b/f) and carry forward (c/f) balances
- The treatment of opening and closing balances for different account types (assets, liabilities, income, expenses, capital)
- Balancing off ledger accounts and preparing them for the next accounting period

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. What do the abbreviations "b/f" and "c/f" mean in a ledger account?
2. When balancing a ledger account at the end of a period, which side does the balance c/f appear on?
3. Why are brought-forward balances needed at the start of a new accounting period?
4. True or false? Expense and income accounts always have balances brought forward into the next period.

## **Introduction**

Ledger accounts are at the core of double-entry bookkeeping. Every business records its financial transactions in ledgers, which show increases and decreases in all accounts over a period. At the end of each period, ledger accounts are balanced, and the resulting balances are “carried forward” to become the starting (“brought forward”) balances for the next period. Understanding how and where to correctly record brought-forward and carried-forward balances is essential for accurate financial records and a recurring exam topic.

> **Key Term: Ledger Account**
> A record within the general ledger that tracks all changes—debits and credits—to a particular asset, liability, income, expense, or capital item over time.

## LEDGER ACCOUNTS: FORMAT AND FUNCTION

Each ledger account traditionally takes the form of a T-account with two sides: debit (left) and credit (right). Entries on each side depend on the account type and nature of the transaction.

At the end of a reporting period, each ledger account is “balanced off” to determine its closing position. This ensures that, for every account, total debits equal total credits when all accounts are considered together.

> **Key Term: Balance c/f (carried forward)**
> The closing balance of a ledger account at the end of an accounting period, inserted to make both sides of the account add up to the same total.
>
> **Key Term: Balance b/f (brought forward)**
> The opening balance of a ledger account at the start of a new period, carried over from the previous period's closing balance.

## THE BALANCING PROCESS

Balancing a ledger account involves the following steps:

1. Sum both sides (debits and credits) of the account.
2. Insert the larger total in both subtotal lines.
3. Calculate the difference between the two sides and enter it as “balance c/f” on the side with the smaller total—this makes both sides equal.
4. Carry this figure to the opposite side (as "balance b/f") at the start of the next period for accounts with continuing balances (assets, liabilities, capital).

### **Worked Example 1.1**

_A furniture retailer’s Bank account at 31 December:_

|               | $      |           | $     |
| ------------- | ------ | --------- | ----- |
| 1 Dec Capital | 10,000 | Purchases | 4,000 |
| Sales         | 3,500  | Rent      | 1,200 |
| Receivables   | 2,000  | Drawings  | 1,500 |
| Balance c/f   | ?      |           |       |

_Balance the account and show the carried forward and brought forward balances._

> **Answer:**
>
> 1. Total credits: \$4,000 + \$1,200 + \$1,500 = \$6,700
> 2. Total debits: \$10,000 + \$3,500 + \$2,000 = \$15,500
> 3. Difference: \$15,500 - \$6,700 = \$8,800 (Balance c/f on credit side)
>    The Bank account now shows:

|               | $      |           | $      |
| ------------- | ------ | --------- | ------ |
| 1 Dec Capital | 10,000 | Purchases | 4,000  |
| Sales         | 3,500  | Rent      | 1,200  |
| Receivables   | 2,000  | Drawings  | 1,500  |
| Balance c/f   | 8,800  |           |        |
| **Total**     | 15,500 | **Total** | 15,500 |

> On 1 January of the next period, "Balance b/f" appears as a debit of \$8,800.

## WHICH ACCOUNTS HAVE BROUGHT-FORWARD BALANCES?

- Asset, liability, and capital accounts normally have balances that are carried forward to the next period.
- Expense and income accounts are closed at period-end, so their balances are not brought forward—they start each period at zero.

### **Worked Example 1.2**

_At year-end, AFTER balancing, which of the following accounts will have a balance b/f at the start of the NEXT period? Bank, Purchases, Sales, Payables, Motor Vehicles._

> **Answer:**
> Bank (asset), Payables (liability), Motor Vehicles (asset) will each have a balance b/f. Purchases and Sales (income and expense accounts) are closed and have no balance b/f.

## COMMON EXAM POINTS

### **Exam Warning**

> It is a frequent exam error to enter the balance c/f on the wrong side. The balance c/f is entered on the side with the smaller total. The balance b/f appears on the opposite side at the start of the next period.

### **Revision Tip**

> When revising, set up simple T-accounts and practise balancing them off. This simple skill often carries easy marks.

## **Summary**

Ledgers must be correctly balanced at the end of each period. The closing balance (balance c/f) is recorded on the side needed to equalise totals. When the new period begins, this balance becomes the opening balance (balance b/f) on the opposite side for the accounts that continue (assets, liabilities, capital). Income and expense ledger accounts are reset to zero each new period.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- The format and function of a ledger account
- The meaning and process for brought-forward and carried-forward balances
- The difference in balance treatment for assets, liabilities, capital, income, and expense accounts
- The step-by-step method to balance off an account and enter balances appropriately
- Typical exam pitfalls with b/f and c/f entries

## **Key Terms and Concepts**

- Ledger Account
- Balance c/f (carried forward)
- Balance b/f (brought forward)

Ledgers and opening balances - Brought-forward and carried-forward balances