What does debit balance mean? Accounting terminology: what is a balance? Active and passive accounts

The word is of Italian origin, its translation sounds approximately like “calculation” or “remainder”. Since the 19th century, the concept began to be applied to accounting balances. Fundamentally, the semantic load of the word has not changed and has acquired an additional meaning - use in a figurative sense, use in the description of foreign economic activity. Asking the question, what is balance? in simple words, we expect to hear something unusual. However, the term has not lost its origins and is still associated primarily with accounting.

What is balance in simple words

Balance- this is the difference between the debit and credit values ​​of accounts. In the most general of the meanings, balance implies a certain balance on a certain day, a difference. We will dwell on the types of balances a little later, but now we will look at examples of the meanings of this word in different areas.

In foreign trade, this is the difference between a country's exports and imports. Using the analysis of the balance of payments, you can analyze floating and determine the pressure on the exchange rate of the national currency.

In payments - the difference between the amounts paid and received from counterparties. In receipts for payment for housing and communal services, this is the balance (that is, overpayment from the previous month) on the apartment’s personal account.

What is a balance in accounting in simple words

As mentioned above, for accounting this concept has almost sacred meaning. Reflecting the difference between the debit and credit of accounts, a balance can be on both the left and right side of the account. Let us recall that the right side is a credit, showing receipts to the account when it is passive and expenses when the account is active. The left side is debit, where, on the contrary, receipts are displayed when the account is active, and expenses when the account is passive.

Each time the amounts move through the account, the difference between the right and left sides changes. Thus, the account balance changes.

Let's consider simplest example calculation of the balance in the accounting account in the table below.

Suppose we have a company whose account is used to consider the movement of raw materials. Such an account will be active (raw materials are a resource, an asset), so at the beginning of the month we have a debit balance - raw materials in stock for 10,000 rubles. RF. As the month progressed, raw materials were sold (for 5 and 1 thousand rubles of the Russian Federation, respectively), and therefore were written off from the account. The purchase went to an asset by debit of 3 thousand rubles. RF.

By the end of the accounting period, having summed up the debit and credit turnovers, we calculate the final debit balance (at the end of the month) – 10,000 + 3,000 – 6,000 = 7,000 rubles. RF. This amount is also the answer to the question: what does the account balance mean?

If the balance is zero, then such an account is usually called closed.

Types of balances, their characteristics

Above we touched on most types of balances in one way or another, but in this section we offer a more detailed and structured description of them.

• Debit balance – account balance reflected by debit. Characteristic of this condition – debit exceeds credit. This balance reflects the state of the organization's assets as of the required date.
• Credit balance is a certain account balance. Its specific feature is the fact that the loan exceeds the debit. The state of liabilities (aka sources of funds) reflects the credit balance.
• A surplus occurs when valuation funds received by the organization are higher than its expenses.
• A passive balance is exactly the opposite situation. Formed when expenses are higher than the active part.

In everyday life, you often come across words that you seem to hear often, you know what area they come from, but there is no understanding of the specific meaning. One of them is balance. Let's try to explain what a balance in accounting is in simple words.

The word balance came into Russian from Italy (sounds like saldo), where it means settlement, balance. In the 19th century, merchants and people who kept barn books began to use the word “balance” to denote the difference between receipts and expenditures, mainly money, for a certain period of time: month, quarter, year. Almost immediately it began to be used by academic economists in works on the theory of economics to describe the movement of funds. After this, balance became a mandatory term accounting, showing the total amount in monetary terms for each account.

Let us recall that accounting is a system of accounts where the property of the organization keeping records is recorded at the beginning of the reporting period, its movement and sources of formation (in this case, a separate account is opened for each accounting object). At the end of the period, the results of the work are summed up: the amount at the beginning of accounting and at the end is compared. If at the end of the period the account balance is positive - more has arrived than it has lost, then the balance is positive. If it’s the other way around, then it’s negative.

Thanks to the balance, the owner (manager) of an enterprise or organization can obtain the following data:

• availability of fixed assets in monetary terms minus their depreciation. Let me explain. Buildings, machines and equipment are working. Therefore, their initial cost decreases. This reduction is called depreciation. Subtracting the accrued amount of depreciation expenses from the cost of fixed assets at the beginning of the reporting period, we obtain the cost minus depreciation, i.e. current real value;
• the cost of raw materials, auxiliary materials, fuels and lubricants, spare parts, equipment, workwear and containers that are in the warehouse (raw materials and materials transferred to production, but not yet used, are not taken into account here);
• balance of funds in ruble and foreign currency bank accounts;
• the amount of debt owed by buyers for products shipped without prepayment or work (services) performed;
• debt to counterparties (buyers) who paid for the goods in full or in part, but did not receive it by the end of the reporting period;
• value of other assets.

After filling out the accounts, the organization’s balance sheet is formed, consisting of two parts:

• passive – right side. Shows debt to counterparties;
• the asset is the left side. All funds owned by a company or organization are shown here.

At the same time, there is a nuance that is difficult for people without special education to understand: on the left side, the receipt of funds is shown as a debit (we owe), the disposal is shown as a loan (we owe), but on the right, everything is the other way around. Income is considered a credit, disposal is considered a debit (you can read more on this topic).

Debit balance, do we owe it or are we owed? On the active side of the balance sheet (active accounts), we are owed. On the passive side, on the contrary, we must.

Example

To understand what a balance is in accounting, let's give an example for dummies. To calculate the balance, the movement is taken Money according to the current account. The numbers and the entries themselves are conditional (in real accounting, entries are written completely differently, but the meaning is the same).

Note that if the balance does not converge, then the balance for each account is reconciled.

Types of balances

Depending on the tasks performed, there are several types of balances in accounting:

• debit – when calculating turnover for a certain period, the amount of receipts turned out to be higher than expenditure transactions (the organization’s work is considered successful);
• credit - this situation occurs when work is unsuccessful: the amount of expenses (costs) exceeds the amount of income, although the overall balance sheet may be positive due to successful work in previous periods;
• zero – expenses and income matched down to the penny;
• active – the monetary value of the organization’s funds increased by the end of the reporting period;
• passive - on the contrary, in value terms the enterprise’s funds have decreased;
• opening – final balance at the end of the previous reporting period. For example, the May 31 balance must always match the June 1 balance, which is the opening balance in June;
• final – the result of activities for reporting period in monetary terms (balance as of June 30);
• for the period – the final result of operations for the reporting period (month, quarter, 9 months, year).

Where, in addition to accounting, is the balance calculated?

In addition to accounting, the balance is used in foreign trade relations. With its help, a country's imports and exports are analyzed. To do this, there are two types of somersaults:

• trade balance;
• balance of payments.

The trade balance shows the difference between a government's import and export operations. A positive balance indicates an excess of exports over imports. In this case, the country buys less than it sells. A negative balance, on the contrary, shows that more is bought than sold (imports exceed exports). A negative balance always has a negative impact on the state of the country’s economy, because it is necessary to find foreign currency to pay for imports (this could be external loans or the sale of gold and foreign exchange reserves accumulated earlier).

The balance of payments shows the difference between foreign exchange receipts into a country for exported goods or services and payments abroad for imported goods. The difference from the first type of somersault is in the payment terms and exchange rates. For example, the goods are exported in December, and the money will arrive in January. This operation will be taken into account in the trade balance, but not in the payment balance.

Conclusion

The term “balance” characterizes the state of the economy of an enterprise, industry and country as a whole for a specific period of time. A positive balance indicates the progressive development of the process, a negative balance means stagnation or regression. And when applied to a specific enterprise - about possible losses, which requires prompt intervention to correct the negative situation.

Trade balance– trade balance: the difference between receipts and expenses from a country’s foreign trade transactions. A positive trade balance indicates that a country's exports exceed its imports. Accordingly, a negative balance shows the inverse ratio of the quantities of imported and exported goods.

In simple terms, trade surplus is the difference between a country's exports and imports.

What is a trade surplus?

Positive trade balance characterized by the predominance of exports of goods and services over imports and is an indicator high level demand for the country's goods on the world market, as well as sometimes about an oversupply of manufactured goods.

What is a negative trade balance?

Negative trade balance indicates widespread consumption of foreign goods. It is generally accepted that a positive balance is better than a negative balance, because in this case, the local manufacturer is supported, and therefore the country’s economy. A negative balance of foreign trade transactions can indicate an underdeveloped and uncompetitive economy. Most often, this situation leads to, which happens as a result of the lack of ability to pay for import transactions.

But this phenomenon also has positive side, namely the ability to curb inflation and maintain a high standard of living. The United States of America and Great Britain can serve as such examples.

Why does a Forex trader need a trade balance?

The trade balance indicator is one of the few indicators that can have not an indirect, but a direct, direct impact on fluctuations. This is explained as follows: the trade balance reflects the constant movement of financial resources between partner countries associated with the provision of certain goods and services according to the agreement.

It is worth noting the existence of one paradox, which is that the reaction of the national currency exchange rate to the trade balance report is minimal, and all due to structural and technical reasons. That is, the report is characterized by some delay. The reason for this is the time required for its preparation and execution. Therefore, exchange rate dynamics very rarely reflect the true flow of values ​​and material resources between trading partners.

Let's look at another important economic term - balance, which is currently used in many areas of human activity, often in a figurative meaning.

Balance: what is it in simple words

Italian word saldo ("remainder") indicate the difference between the income and expenses of an enterprise for a specific period of time. This indicator can be both positive and negative.

Balance is a specific concept that arose in accounting. For some time now it has begun to be used in the field of foreign economic relations.

Accounting balance

In the classical sense, the balance is the difference between the amount of receipts to the company’s account and the amount of write-offs. The balance reflects the financial condition of the enterprise at a particular point in time.

In accounting, there are two types of balances:

• Debit. It is formed when debits exceed credits and is reflected in the asset column.
• Credit a balance occurs when debit exceeds credit, and is recorded in the liability column. If the balance is zero, the account is considered closed. There are known situations when the same account has two types of balances.

By the way, we’ve told you more about assets and liabilities. We strongly recommend that you familiarize yourself with it.

In accounting, it is not customary to consider the entire history of accounts “from the beginning of time.” As a rule, we are talking about some limited time period - for example, the last month or quarter. Therefore, there is a classification of balances by time period. According to it, there are:

• Initial balance, reflecting the balance at the beginning of the month/year/quarter.
• Balance for the period– total balance for the specified period.
• Final balance– balance at the end of the month/year/quarter. To get the final balance, you need to add the turnover indicator located in the same part of the account to the initial balance, and then subtract the turnover indicator taken from another part of the account.

Trade and payments balance

In foreign trade operations, the balance is the difference between the amounts of exports and imports for a specified period (most often 1 year). Exist the following types balance:

1. 1. Trade balance.
2. 2. Balance of payments balance.

Trade balance– the difference between the cost of exported and imported goods. This indicator can have both positive and negative meaning. The trade balance can be analyzed in relation to a single region, state or class of goods.

When exports exceed imports—that is, a country sells more goods abroad than it purchases from its neighbors—they speak of a surplus. It arises when a country does not need the quantity of goods it produces, while the world market, on the contrary, is interested in its products.

A negative balance occurs when imports exceed exports. In most cases, this situation is unfavorable for the country. This balance is evidence that she cannot provide for herself and becomes dependent on her neighbors. The negative balance also speaks of the deplorable situation of the local manufacturer: the limitation of its capabilities, the uncompetitiveness of its products. A negative balance is fraught with a depreciation of the national currency.

Thus, a negative balance does not bode well for the state. True, in highly developed countries it is not always a problem. A negative balance prevents inflation from growing in the United States, as well as in some European countries. In addition, it makes it possible to move complex industries to developing countries.

The trade balance is the basis for the balance of payments.

Balance of payments balance– this is the difference between the amount of payments from abroad and the amount of payments abroad. When inflows exceed outflows, the balance is positive. If a country gives more money than it receives, it is negative.

A negative balance does not have the best effect on the local currency: it depreciates. Therefore, it is not surprising that most developed countries are still interested in ensuring a positive balance.

As you can see, balance is a multi-valued term. But all variations of its interpretation do not lose touch with the original understanding of the balance as the difference between income and expenses.

Balance is a term that denotes the difference between the receipt of funds and their expenditure over a certain period of time. Although we can talk about what a balance is in many different ways, we will highlight 2 aspects (areas of application) from the standpoint of which we will evaluate the meaning of this term: accounting and trade relations with foreign countries.

Balance in accounting

The term "balance" used in accounting means the balance of accounting account, calculated as the difference between the amounts of entries in the debit and credit of accounts. When recording, it is transferred to a new page and calculated every month on the first day.

1. In the case when the debit is greater than the credit, we speak of a debit balance - it is recorded in the asset (let me remind you that you can read about it at the link provided) and reflects the state and funds of the organization in the current account on a specific date.
2. A credit balance occurs when credit exceeds debit. It is recorded in the liability side and reflects the state of the sources of economic funds.

If an accounting account has a balance equal to zero (in other words, it has no balance), then it is considered closed. But it also happens that for some accounts two types of accounts are formed at the same time - both debit and credit.

When we analyze an accounting account, we should be primarily interested in the period of time closest to us, for example, the last month during which the account was kept. Based on this position, we will primarily be interested in data such as:

• The opening balance (or it is also called the opening balance) is what was formed when analyzing movements in the account for the last analyzed period (usually a month) and at the beginning of the period (in our case, a month) is the account balance.
• Balance for a period is the result of adding up all transactions in an accounting account for a specific period of time.
• Debit and credit turnover s for the period - indicators that calculate changes in funds recorded in the relevant parts accounting account, for a certain period.
• The ending balance (or it is also called the outgoing balance) - in the case of active accounts, is calculated as the sum of the debit balance at the beginning of the month and the debit turnover minus the credit one. In case of passive account The calculation technology is constructed as follows: the credit turnover is added to the credit balance, and then the debit turnover is subtracted.

As noted earlier, first of all, the accountant is interested in the incoming or outgoing indicators over a period of time of one month.

Concept used in the analysis of indicators in foreign trade

When analyzing or assessing the scale of a country's foreign trade activities, the concept of “balance” has become widespread.

In this area it is appropriate to talk about such definitions as:

1. Trade balance - is applicable when assessing the difference between the volumes of exports and imports and is calculated, in fact, as the difference between the value of the first and second. The foreign trade balance is an indicator that evaluates the ratio of the value of exported and imported goods over a certain period of time (usually a year). If a certain country has more revenue from selling goods abroad than its costs for purchasing goods from abroad, then it is said that c-do is positive. In the opposite case, when a country purchases goods for a larger amount than it sells, one should speak of a negative trade balance. Of course, a positive trade balance is the more preferable option, since a negative trade balance creates an oversupply of imported goods in the country, which constitute significant competition for domestic producers. This parameter is relevant, for example, when analyzing a country’s creditworthiness and identifying the level of its reliability for investors. For example, the International Monetary Fund evaluates it when it decides to issue a loan to a particular country. But in general, this parameter cannot fully assess the current state of the economy in the country. An example is the United States, a country whose trade balance has been in deficit since 1976, despite the fact that the standard of living in the country remains one of the highest in the world.
2. There is one more parameter that you need to know when analyzing a country's foreign trade - the balance of payments - calculated by subtracting payments given abroad from receipts into the country from abroad. It is worth recalling that the balance of payments itself is a statement in which the movements of funds from one country to another are clearly recorded. Accordingly, a positive c-do is a sign of an excess of payments received from abroad over outgoing ones, and a negative one is a sign that more payments go abroad than enter the country. It is worth noting the fact that international payments take place in the most convertible currencies, such as the US dollar or euro. Consequently, countries with a negative balance of payments, for the most part, gradually lose their foreign exchange reserves. However, this does not fully apply to all countries, since some countries may pay foreign suppliers with their own country's currency, and then simply conduct additional payments. For example, the United States can simply print the required number of dollars. Although, this is not even the only option - there are methods of so-called “indirect” emission that involve the creation of “credit” money using the bank multiplier.

It is worth noting that Russia sells goods going abroad for foreign currency, and therefore there is no need to buy Russian currency from foreign partners receiving the goods.

The last meaning, in which the concept being studied is least often used, has the following meaning: this word refers to the debt incurred by the client to the brokerage firm or, conversely, by the broker to the client when performing exchange transactions that are well known to us from the articles of this project.

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In this article, we learned what a balance is, understood the essence in various areas and gave a qualitative definition. In the next issues, look forward to new articles from the “accounting” section.