Rule off definition
/What is Rule Off in Accounting?
In accounting, the term "rule off" refers to the practice of drawing a horizontal line, typically a single or double underline, beneath the final figures in an account, journal, or financial statement to indicate that the totals have been finalized and no further entries will be made for that period. This visual cue is used to signify the closure or balancing of an account, confirm the completion of a set of entries, or mark the end of a reporting period. By ruling off, accountants clearly separate concluded financial activity from ongoing or future transactions, ensuring clarity and preventing unauthorized or mistaken additions.
When to Use a Rule Off
Here are the key situations in which a rule off is used:
Balancing a ledger account at period end. When an account (e.g., Cash or Accounts Receivable) is balanced at the end of a reporting period, a rule off is drawn under the totals to indicate the account has been closed off for that period.
After totals are carried down. After computing the balance of an account and bringing the balance forward (carried down to the next period), a rule off is used above the "balance c/d" and below the totals to mark the end of that period’s activity.
When a temporary account is closed. Temporary accounts like revenue, expense, and drawings accounts are closed at period-end. A rule off is drawn to show the account has been zeroed out and transferred (usually to capital or income summary).
After posting an adjusting entry. Once all necessary adjusting entries are made and verified, the account may be ruled off to signify the adjustments are complete.
Completion of a journal entry page. At the bottom of a journal page, a rule off is drawn to indicate the total of the debits and credits and the end of that page’s entries.
Finalizing a trial balance. A double rule is used after the totals of the trial balance to show that debits equal credits and the listing is complete.
Completion of the cash book. In a cash book, rule offs are drawn at the end of a period or page to total receipts and payments, confirming that the cash balances are correctly carried forward.
The rule off concept is most commonly used in accounting reports to separate blocks of information, thereby enhancing the readability of the reports. For example, the following extract from an income statement shows a rule off being used to separate the gross margin information from the other expense line items beneath it. Further down in the report, there is another rule off that separates the individual compensation line items from the total compensation expense.
