The concept of the balance came from Italy. As an accounting term, it stuck in the XIX century. The balance is translated from Italian as the rest of the calculation, the price paid. In accounting, it means the difference between the amount of pay-in account, that is, flow rate, and expense account – credit. At the beginning of the XX century its meaning has expanded and moved beyond accounting.
Types of balance
Credit balance – in this case credit is bigger than flow rate. This indicator makes it possible to see the status of a source of income that is used for the execution of business affairs of the enterprise. The credit balance is shown in the balance sheet liabilities.
Debit balance – debit is bigger than credit. It shows the state of the balance relating to the conduct of operations. In this case for the basis is taken a specific period of time.
The score on performed operation closes when the difference between credit and debit is zero.
Usually, in practice, not the whole history of the movement of funds is taken into account, but the selected time period (month, quarter, year). This period is called reporting.
The calculation of the balance of money in the account is not possible without understanding of the following definitions:
- Opening balance. It shows the rest of finance on a specific account of the beginning of the reporting period. This is calculated by taking into account the previous operations;
- outgoing balance shows the balance of the account on the date of completion of the period. To calculate the amount you need to add up the initial balance and all transactions for a specific period;
- the balance of the period – this figure indicates the result of all the previous operations, which were carried out in a certain period.
To determine credit turnover it is necessary to calculate the result on the accounts of by selecting the desired period.
At the present time, as well as a few centuries ago, the balance – is the difference of final accounts according to the account of debit and credit.
But besides the specific accounting transactions this term is widely used in foreign trade.