Carry Forward

Updated on June 15, 2024
Article byJyotsna Suthar
Edited byJyotsna Suthar
Reviewed byDheeraj Vaidya, CFA, FRM

Carry Forward Meaning

Carry Forward, in accounting, is a method to transfer more items from one ledger account to another. The prime purpose of this method is to shift the current period’s balances to another. It is denoted by c/f at the end of the item’s name.

Carry Forward

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In reality, the set off and carry forward uses prevail in many contexts. Some include financial accounting, taxation, project management, and communication. It is calculated as the balances on the operating ledger and process. Also, it provides financial stability and decision-making. Moreover, the leftover amount does not stay in the previous ledgers.

Key Takeaways

  • Carry forward, in accounting, refers to the technique or process of closing a balance and sending it to another ledger account or future financial year.
  • It is denoted by c/f and expressed at the end of the financial item. For example, Gross Profit (c/f)  … $30,000.
  • It applies to various financial items listed in the accounting books. Plus, it creates a continuity between the balances of two different items.
  • According to the IRS (Internal Revenue Service), businesses and individuals can set off carried-forward capital losses using capital gains.

Carry Forward In Accounting Explained

Carry forward is a technique in accounting and finance where the balance of assets or any item is shifted to another period. It happens in profit and loss (P&L) statements and balance sheets. Auditors and accountants can use balance carry forward to determine the amount of assets and liabilities. It maintains a certain level of continuity between two consecutive years. As a result, it ensures smooth and effective financial reporting. Also, firms can set off and carry forward during taxation.

The balance carried forward can be either profits or losses. For example, if a business has a gross profit of $30,000 in the trading account, it will get carried forward to the next ledger account. Likewise, any loss or profit incurred in the financial year will proceed to the next financial year either as a reserve or as an opening balance. However, a similar amount can be a closing and an opening balance for another account. In the accounting case, the leftover balance is treated as a “closing balance” carried forward to another account. Other accounts might treat it as an opening balance, associating it with “brought forward.” Thus, carrying forward and bringing forward always complement each other.

Various other contexts of balance carry forward losses in other fields of study. For instance, carry forward refers to market positions transferred to the next business day in stock trading. In short, any trader buying shares will not sell them on the same day. Instead, shift the bearish position to another day.

Similarly, while recording and filing taxes, even individuals can move capital losses through carry forward to the next year. As per federal law, businesses can offset any capital gain in the future using the pending capital losses carried forward from previous years. According to the Internal Revenue Service (IRS), the capital losses carried forward can be used many times. Moreover, similar treatment is available for tax losses incurred in any year.


Let us look at the examples to comprehend the concept in a better way:

Example #1

Suppose a firm prepares financial statements for the financial year dating 2022-23. Before that, they recorded journal entries and ledger accounts. Following were the items listed in the trading account:

  1. Net Sales – $100,000
  2. Net Purchases – $50,000
  3. Gross Profit – $50,000

This gross profit is the closing balance to carry forward to the trading account and opening for profit and loss statements. The journal entry for this transaction is listed below:

closing balance to carry forward

Here, since the amount is the closing amount of the Trading ledger, it contains the word carry forward (c/f). Likewise, as the opening balance in the P&L statement, it has been brought forward (b/f).

Example #2

According to a recent article dated March 2023, the US Supreme Court has allowed certain additional treatment for foreign taxes. The Swedish tax law has enabled the set-off of forward tax carry forward with the foreign-source interest income. It also includes any income that was not subject to foreign tax in that year. Moreover, such foreign tax credits can be carried forward for up to five years

Carry Forward vs Brought Forward

Although carry forward and brought forward have an interlink, they differ slightly. So, let us look at the differences between them:

Key pointsCarry ForwardBrought Forward
MeaningIt refers to the transfer of the closing balance of a financial item to another account or period.Brought forward refers to bringing a closing amount and treating it as an opening balance. 
PurposeShift or carry the closing amount and forward it to the respective ledger.To make some changes in the carried forward amount and entering in the books.
Denoted asCarry forward is written as “c/f” at the end of the financial item.In this case, “brought forward is expressed as “b/f” in the financial books.
Application and UsesThe major use of the term is visible in accounting, stock market, and taxation.Brought forward is used in accounting procedures and business meetings via a formal tone.

Frequently Asked Questions (FAQs)

How to carry forward concessional contributions?

If there is any leftover or unused balance of concessional contributions, it is carried forward to the preceding years. It can be done up to five years before they are set to expire. However, to use this feature, an individual must have a total super balance of less than $500,000 before June 30th of the current year.

What is a carry-forward income?

Carry forward income transfers income from one period or account to another ledger. This work usually occurs while posting journal entries or preparing individual ledger accounts of financial items.

What is a carry-forward basis?

It refers to the carry-over of the cost basis of the asset given or gifted by an individual. It occurs majorly in the sale of property-related assets.

How long can an individual carry forward capital losses?

It depends on the rules and regulations within the economy. In the United States, federal law allows indefinite times to carry forward capital losses until fully exhausted. Likewise, in India, it is restricted to eight years.  

This has been a guide to Carry Forward and its meaning. Here, we explain this concept in detail along with its examples and comparison with brought forward. You can learn more about accounting from the articles below –

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