What is Balance Payment and Balance Trading

balance

What's the balance?

With the term "balance“It is one of the oldest terms that we know from the field of bookkeeping and business administration. Generations of accountants and tax consultants have certainly spent a significant part of their lives trying to find the wrong one balance or to detect and correct incorrect balances, balances. Loosely translated, balance means something like "to fix". In the case of accounts, revenue, and the income statement, this is fairly binding.

Where does the term balance come from?

The term itself comes from the Italian. The balance defines the difference between debit and credit of each booking account. Put simply, the inflows and outflows (debit side and credit side) are offset on the accounts.

Through this mechanism, the balance or balances (balances) has a direct effect on the income statement and thus also on the balance sheet. Insofar as the company is obliged to report.

The balance on the checking account

If you're more of the visual type, we'll explain the term balance using a common account

Amounts received on the account in euros, i.e. credits, are on the credit side. Amounts that go out of the account, i.e. direct debits, transfers and withdrawals, are on the debit side.

The balance results from the total. If more income is received into the account than from, the account balance is positive or "credit". If there are more debits, the account is in the red, ie in the "debit".

Example: The balance in the bookkeeping

It works in a very similar way in business bookkeeping and financial accounting. The “debit” is on the left and the “credit” is on the right. In the case of simple booking records, the expense, i.e. the expenditure, is booked on the debit side and the debit on the credit side:

A greatly simplified example: An invoice for EUR 1,000 for office supplies is paid by transferring the business account: S 4930 to H 1200 EUR 1,000

With the consideration and use of active and passive accounts, the correct booking and balancing is not quite so mundane. If you summarize the balances of all accounts, they form a valid basis for accounting and creating the balance sheet.