In accounting, CD and BD refer to Carried Down and Brought Down balances, respectively, and are used in ledger accounts to maintain continuity between accounting periods.
Here's a breakdown:
Understanding Balance B/D and C/D
According to the reference:
-
Balance B/D (Brought Down): This is the opening balance of a ledger account at the beginning of a new accounting period. It's carried over from the closing balance of the previous period. Think of it as the starting point for your account in the new period.
-
Balance C/D (Carried Down): This is the closing balance of a ledger account at the end of an accounting period. This balance is then transferred to the next accounting period as the opening balance (B/D). It ensures that the accounts are up-to-date and accurate from one period to the next.
Practical Application
| Term | Meaning | Usage |
|---|---|---|
| Balance BD | Balance Brought Down; opening balance of a ledger account. | Used to start a new accounting period with the previous period's ending balance. |
| Balance CD | Balance Carried Down; closing balance of a ledger account. | Used to close out an accounting period, with the balance being transferred to the next period as B/D. |
Example:
Let's say a business has a cash account. At the end of December, the cash account has a balance of $5,000.
- Balance C/D (at December 31st): \$5,000. This means the closing balance, which is the cash balance, is \$5,000.
- Balance B/D (at January 1st): \$5,000. This means the opening balance is now \$5,000. This value will be brought down at the beginning of the next accounting period.
Additional Notes
- A "Debit Balance" occurs when the debit side of a ledger exceeds the credit side, which is confirmed in the reference.
