B/D (Brought Down) is a term used in accounting to indicate the balance that is carried forward from the previous page or period. It is an essential notation that ensures the continuity and accuracy of financial records.
Historical Context
The concept of carrying forward balances has been integral to accounting since the inception of double-entry bookkeeping in the 15th century by Luca Pacioli. This method helps maintain a continuous and accurate financial record, enabling businesses to track their financial health over time.
Types/Categories
In accounting, B/D (Brought Down) is typically observed in:
- General Ledger: The primary accounting record, where all transactions are posted.
- Subsidiary Ledger: A detailed ledger supporting the general ledger.
- Trial Balance: A report that lists all the balances in a company’s general ledger accounts.
- Financial Statements: Summarized accounts that include the income statement, balance sheet, and cash flow statement.
Key Events in Accounting History
- 1494: Publication of Luca Pacioli’s “Summa de Arithmetica,” which introduced double-entry bookkeeping.
- 1930s: Development of Generally Accepted Accounting Principles (GAAP).
- 2001: Formation of the International Accounting Standards Board (IASB).
Detailed Explanation
How B/D Works
When closing an accounting period, the final balance on the accounts is ‘carried down’ (C/D) to indicate the balance at the end of that period. On the next period’s account, this balance is ‘brought down’ (B/D) at the beginning. This process ensures that there is no interruption in the tracking of balances from one period to the next.
Example:
If a ledger account for Cash has a closing balance of $5,000 on December 31, this would be noted as:
Date Description Debit Credit Balance
31-Dec Balance C/D 5,000
On January 1 of the new year, this balance is brought down:
Date Description Debit Credit Balance
1-Jan Balance B/D 5,000
Charts and Diagrams
graph TD;
A[Period 1] -->|Balance C/D| B[End of Period 1];
B --> C[Period 2];
C -->|Balance B/D| D[Beginning of Period 2];
Importance
- Accuracy: Ensures financial records remain accurate and consistent.
- Continuity: Provides seamless transition between accounting periods.
- Verification: Aids in the verification and reconciliation of account balances.
Applicability
B/D (Brought Down) is widely applicable in:
- Corporate Finance: Ensuring accurate and continuous records in financial statements.
- Auditing: Verifying accuracy and completeness of financial records.
- Personal Finance: Maintaining clear and accurate financial records for individuals.
Considerations
- Consistency: Always carry forward balances at the correct amount.
- Reconciliation: Regularly reconcile accounts to ensure B/D balances match.
- Documentation: Keep thorough records to support B/D entries.
Related Terms
- C/D (Carried Down): Indicates the balance at the end of an accounting period.
- T/B (Trial Balance): A summary of all ledger account balances.
- General Ledger: The main accounting record for a company.
- Opening Balance: The balance in an account at the start of a new accounting period.
Comparisons
B/D vs. C/D
- B/D (Brought Down): Balance at the start of a new period.
- C/D (Carried Down): Balance at the end of a current period.
Interesting Facts
- The practice of carrying forward balances dates back to early commercial and banking records in ancient civilizations.
- The term B/D is predominantly used in Commonwealth countries, with variations in terminology in different regions.
Inspirational Stories
John D. Rockefeller, one of the wealthiest individuals in history, began his career as a bookkeeper and recognized the importance of accurate financial records, including carrying forward balances, which helped build his fortune.
Famous Quotes
“Accounting does not make corporate earnings or balance sheets more volatile. Accounting just increases the transparency of volatility in earnings.” — Diane Garnick
Proverbs and Clichés
- “Balance your books before you cross the brook.”
- “A balanced ledger makes for a balanced life.”
Expressions, Jargon, and Slang
- B/D: Common shorthand in accounting for “brought down.”
- Balance Brought Down: Full form often used in formal accounting records.
FAQs
What does B/D mean in accounting?
Why is B/D important?
How do I record a B/D entry?
References
- “Principles of Accounting” by Belverd E. Needles.
- “Accounting: Tools for Business Decision Making” by Paul Kimmel, Jerry Weygandt, and Donald Kieso.
- “Financial Accounting Standards Board (FASB)” official website.
Summary
B/D (Brought Down) is a fundamental accounting practice crucial for maintaining the continuity and accuracy of financial records. It involves carrying forward the balance from the end of one accounting period to the beginning of the next. This practice not only ensures financial accuracy but also helps in the seamless transition and verification of records across periods. Understanding and properly utilizing B/D is essential for effective financial management, whether for individuals or corporations.
