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Lesson 3: Running balances with debits and credits
Practice exercises for accountants, checked instantly in your browser.
A running balance carries the previous balance forward and applies this row's movement. For an asset such as a bank account, debits increase the balance and credits decrease it: =E2+C3-D3. For a liability such as a credit card payable, the normal balance is a credit, so credits increase it: previous + credit − debit.
Each row points at the balance directly above it, so do not lock that reference. Fill the formula down and the last row shows the closing balance. IF can then label rows, for example to flag a negative balance.
=E2+C3-D3Previous balance (E2) plus this row's debit minus this row's credit: the rule for an asset account.
Exercises
Exercise 1
Northfield Dental Studio's bank account (an asset) opens at 5,000.00 in E2. In E3, write the running balance formula and fill it to E8.
Exercise 2
This is the company credit card account, a liability. Charges are credits, payments are debits. In E3, write the running balance and fill it to E6.
Exercise 3
Balances are in column E. In F3, return Overdrawn if the balance is below zero, otherwise OK. Fill to F8.