Carried Down (**c/d**)

In book-keeping, 'carried down' (**c/d**) refers to an amount that is to be transferred as the opening balance in the next accounting period.

Definition: Carried Down (c/d)

‘Carried down’ (c/d) is an accounting term used in book-keeping to describe an amount that is transferred from the closing balance of the current period to the opening balance of the next period. This practice ensures the continuity of financial statements from one accounting period to another. It is represented in ledgers as an indication that certain balances, whether credit or debit, will be brought forward to the next accounting period.

In double-entry book-keeping, a balance that is carried down from one ledger account can either reflect an asset, liability, equity, revenue, or expense balance, depending on the nature of the account.

Examples

  1. Carrying Down a Debit Balance:

    • Suppose a company has a Supplies account with a closing debit balance of $1,200 as of December 31st. This balance would be ‘carried down’ (c/d) to the Supplies account for the new year starting January 1st, appearing as the opening balance.
  2. Carrying Down a Credit Balance:

    • If a company’s Accounts Payable ledger shows a closing credit balance of $10,000 on June 30th, that balance will be ‘carried down’ (c/d) to July 1st, representing the opening balance for the new month.

Frequently Asked Questions (FAQs)

Q: Why is the term ‘carried down’ necessary in book-keeping?

A: The term ‘carried down’ (c/d) signifies the transfer of closing balances to the new period, maintaining the continuity and accuracy of financial statements across different accounting periods.

Q: Is ‘carried down’ used in all types of accounting systems?

A: Yes, ‘carried down’ is a fundamental concept applicable to most accounting systems that use periodic financial records, including manually maintained ledgers and computerized accounting systems.

Q: How does ‘carried down’ differ from ‘brought down’?

A: ‘Carried down’ (c/d) indicates the transfer of a balance to the next period, while ‘brought down’ (b/d) denotes the reception of this balance as the opening balance in the new period.

Q: What happens if a carried down balance is not transferred correctly?

A: Incorrect transfer of a carried down balance can lead to discrepancies in the financial statements, impacting the accuracy of financial reporting and potentially leading to errors in business decisions.

Q: Are there automated systems for carrying down balances?

A: Yes, contemporary accounting software can automate the process of carrying down balances, reducing manual errors and ensuring timely and accurate financial record-keeping.

  • Brought Down (b/d): The balance that is brought into a new period from the previous period, often the converse entry to ‘carried down’.
  • Closing Balance: The amount in an account at the end of an accounting period before it is carried down.
  • Opening Balance: The amount in an account at the beginning of an accounting period, which is usually the carried down amount from the previous period.
  • Double-Entry Accounting: A system of accounting in which every entry to an account requires a corresponding and opposite entry to a different account.
  • Ledger: A book or other collection of financial accounts.

Online References

Suggested Books for Further Studies

  • “Bookkeeping Essentials: How to Succeed as a Bookkeeper” by Steven M. Bragg
  • “Financial & Managerial Accounting for MBAs” by Peter D. Easton, John J. Wild, Robert F. Halsey
  • “Fundamental Accounting Principles” by John Wild, Ken W. Shaw, and Barbara Chiappetta

Accounting Basics: “Carried Down (c/d)” Fundamentals Quiz

### What does 'carried down' (c/d) typically refer to in accounting? - [ ] The calculation of tax liabilities. - [ ] The initial transaction in an accounting period. - [x] The transfer of an account balance to the next period's opening balance. - [ ] The entry for recorded depreciation. > **Explanation:** 'Carried down' (c/d) refers to transferring the closing balance of an account in one period to be the opening balance in the next period. ### What is the primary purpose of 'carrying down' balances? - [x] To ensure continuity of financial statements. - [ ] To calculate employee salaries. - [ ] To determine sales tax. - [ ] To finalize annual inventory counts. > **Explanation:** Carrying down balances ensures the continuity and accuracy of financial statements from one period to the next. ### What type of balance can be 'carried down'? - [x] Both debit and credit balances. - [ ] Only debit balances. - [ ] Only credit balances. - [ ] Balances are not carried down in accounting. > **Explanation:** Both debit and credit balances can be carried down to ensure accurate accounting records. ### How is a 'carried down' balance displayed in ledgers? - [ ] As a separate account entry. - [x] As the closing balance in the current period and the opening balance in the next period. - [ ] As a summary of transactions. - [ ] As a note in the margin. > **Explanation:** A 'carried down' balance appears as the closing balance for the current period and directly transitions to the opening balance for the next period in the ledger. ### In which accounting system is the concept of 'carried down' used? - [x] Double-entry accounting system. - [ ] Single-entry accounting system. - [ ] Cash accounting system. - [ ] Tax accounting system. > **Explanation:** The concept of 'carried down' is integral to the double-entry accounting system, ensuring all balances are transferred across periods for continuity. ### What is the opposite of a 'carried down' balance? - [ ] Written down. - [x] Brought down (b/d). - [ ] Closed out. - [ ] Rolled back. > **Explanation:** The opposite of a 'carried down' (c/d) balance is a 'brought down' (b/d) balance. ### How does 'carried down' affect financial statements? - [ ] It increases tax liabilities. - [ ] It provides immediate profit calculations. - [x] It maintains continuity across accounting periods. - [ ] It changes investment schedules. > **Explanation:** 'Carried down' balances maintain continuity across accounting periods, reflecting accurate financial data. ### Which tool can automate the process of carrying down balances? - [ ] Manual ledgers. - [ ] Tax software. - [x] Accounting software. - [ ] Payroll systems. > **Explanation:** Accounting software can automate the process of carrying down balances, reducing manual errors and ensuring accurate financial records. ### What may result from failing to transfer a 'carried down' balance correctly? - [x] Financial discrepancies and errors. - [ ] Increased net income. - [ ] Decreased operational costs. - [ ] Immediate tax refunds. > **Explanation:** Incorrectly transferring a carried down balance can lead to financial discrepancies, impacting the accuracy of financial records. ### Which accounting principle necessitates the use of 'carried down' balances? - [ ] Tax principle. - [ ] Realization principle. - [ ] Consistency principle. - [x] Continuing concern principle. > **Explanation:** The continuing concern principle, which assumes that an entity will continue its operations indefinitely, necessitates the use of carried down balances for seamless financial continuity.

Thank you for exploring the intricate details of the ‘carried down’ (c/d) concept in accounting and taking on the challenge of our comprehensive quiz questions. Continue enhancing your financial literacy and bookkeeping skills!


Tuesday, August 6, 2024

Accounting Terms Lexicon

Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.