Q7. Balancing of a journal entry
When does a journal entry balance?
A7. A journal entry balances when the sum of debit amounts is same as the sum of credit amounts.
(1) Entity A purchased merchandise at $9,000 and paid $7,000 in cash. $2,000 will be paid 30 days later.
Incorrect journal entry:
| Debit | Credit | |
| Merchandise | 9,000 | |
| Cash | 7,000 |
This journal entry does not balance.
1. Debit amount = $9,000
2. Credit amount = $7,000
3. Debit amount ≠ Credit amount
(2) Entity A purchased merchandise at $9,000 and paid $7,000 in cash. $2,000 will be paid 30 days later.
Correct journal entry:
| Debit | Credit | |
| Merchandise | 9,000 | |
| Cash | 7,000 | |
| Accounts payable | 2,000 |
This journal entry balances.
1. Debit amount = $9,000
2. Credit amount = $7,000 + $2,000 = $9,000
3. Debit amount = Credit amount
[Note]
1. Balancing is only a necessary, not sufficient, condition for a correct journal entry.
2. A balanced journal entry does not guarantee that it is correct.
3. A balanced journal entry may be incorrect if it uses wrong accounts, amounts or sides.