Balance (accounting)

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In banking and accountancy, the outstanding balance is the amount of money owed, (or due), that remains in a deposit account.

In Bookkeeping: Balance is difference between the debit and credit sides of an account. [1]

Within an accounting period, "balance" reflects the net value of assets and liabilities. To better understand balance in the accounting equation (see equation below). When total debits exceed total credits, the account indicates a debit balance, the opposite is true when the total credit exceeds total debits, the account indicates a credit balance. If the debit/credit totals are equal, the balances are considered zeroed out.

"Balancing the books" refers to the primary Balance sheet equation of A=L+OE, or Assets=Liabilities plus Owner's Equity. The first "balancing" of books, or of the balance sheet financial statement in accounting is to check iterations (test balances) to be sure the equation above applies, and where Assets and Liabilities are unequal, to equalize them by debiting or crediting Owner's Equity (i.e. if assets exceed liabilities, equity is increased, if liabilities exceed assets, equity is decreased, both in the amount needed to balance the equation).

In addition to the balance sheet, the other primary financial statement (the P&L or Profit and Loss Statement) also is balanced against the balance sheet, generally by use of a "plug" such as imputed interest.