In accounting, the balance of an individual ledger account is determined in which of the following ways?

Introduction / Context:
Every ledger account in double entry bookkeeping records debits and credits related to a particular item such as cash, accounts receivable or revenue. At any point in time, we need to know the balance of that account, which represents the net position after considering all increases and decreases. This question asks you how that balance is calculated from the debit and credit entries stored in the account.

Given Data / Assumptions:
- The subject is the method for determining the balance of a ledger account. - Options mention sums of debits and credits, differences, products and latest transaction amounts. - We assume a standard T account format where debits are on the left and credits on the right. - We must choose the method that correctly gives the account balance.

Concept / Approach:
To find the balance of a ledger account, you first total all the debits and total all the credits. You then subtract the smaller total from the larger total. The difference is the account balance. If the total debits exceed total credits, the account has a debit balance. If total credits exceed total debits, it has a credit balance. Simply summing debits and credits without comparing them does not give a net figure. Multiplying debits and credits is meaningless in this context, and using only the latest transaction ignores all previous activity.

Step-by-Step Solution:
Step 1: Add up all debit entries in the account to find the total debit amount. Step 2: Add up all credit entries in the account to find the total credit amount. Step 3: Compare the two totals. Subtract the smaller from the larger to find the net difference. Step 4: The resulting figure is the account balance, which is classified as a debit or credit balance depending on which side is greater. Step 5: This procedure matches option B, which describes the balance as the difference between total debits and total credits.

Verification / Alternative check:
Consider a sample cash account with total debits of 10,000 and total credits of 7,500. The difference is 2,500, which is the cash balance, and it is a debit balance since debits are larger. If we summed both sides without subtraction, we would incorrectly report 17,500, which is not a meaningful balance. If we multiplied 10,000 by 7,500, we would get an even more meaningless number for financial reporting. Using only the last transaction would ignore the rest of the account history. This simple example confirms that the balance must be determined as the difference between the totals of debits and credits.

Why Other Options Are Wrong:
Sum of credits and debits without comparison: This gives a combined total, not a net balance, and is not useful for reporting. Product of credits and debits: Multiplying monetary amounts has no logical basis in determining account balances. Latest transaction only: The balance reflects all prior transactions, not just the most recent one.

Common Pitfalls:
Students new to accounting may misread trial balances and think that total debits or total credits alone represent balances. The crucial idea is that an account tracks cumulative increases and decreases, and the net position is the difference. Another pitfall is not keeping track of whether the balance is a debit or a credit, which affects how it is presented on the financial statements. For exam purposes, always remember that the balance of an account equals total debits minus total credits or vice versa, depending on which side is larger.

Final Answer:
The correct option is By calculating the difference between the total debits and the total credits in the account, because this method captures the net effect of all transactions recorded in the ledger account and yields the correct balance.