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Astha
AsthaLeader
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CreditDebitOpening Balance
  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    Let us begin with a short explanation of what opening balance is: The opening balance is the amount of funds that are bought forward from the end of one accounting period to the beginning of a new accounting period. In a firm’s account, the first entry done is of the opening balance. It can either hRead more

    Let us begin with a short explanation of what opening balance is:

    The opening balance is the amount of funds that are bought forward from the end of one accounting period to the beginning of a new accounting period.

    In a firm’s account, the first entry done is of the opening balance. It can either have a debit balance or a credit balance depending upon whether the firm has a negative or positive balance.

    Opening balance of a ledger

    Opening balance is the first entry of the ledger account at the beginning of an accounting period.

    In the case of a newly started business, there will be no closing balances and as such there will be no balances to be carried forward. In such a case, the investment and capital of the business will be entered as an opening balance for the current accounting period.

    So the first and foremost part is to identify on which side of the ledger i.e. the debit side or the credit side the opening balance is to be entered.

    For Example, A trial balance is given which represents the debit and credit balances, accordingly, I will prepare different ledger accounts to make it simpler.

    The trial balance shows the opening balance of various accounts. Now posting them in ledger accounts.

    As the Furniture is an Asset account, the opening balance will be on the debit side of the ledger account.

    As Sundry creditor is a credit account,  we put the opening balance on the credit side.

    As the Capital is a credit account,  we put the opening balance on the credit side.

    As Wages is a debit account,  we put the opening balance on the debit side.

    As the Discount received is a credit account,  we put the opening balance on the credit side.

    Exception

    Drawing Account.

    Drawing account is an exception to this topic. It is considered a contra account to the owner’s capital account because it reduces the value of the owner’s equity. Drawings, therefore, have no opening balance.

    Contra Entry.

    Contra entry involves transactions of cash and bank. Any entry which involves both the cash and bank is contra entry.

    For example, we deposit cash 5000 into the bank.

    Accounting entry for this transaction would be

    In this case, the ledger entry would be

    As the bank account has a debit balance, the opening balance would come on the debit side.

    As the cash account has a credit balance, the opening balance would come on the credit side.

    Alternatively, If we withdraw cash 5000 from the bank.

    Accounting entry would be

    In this case, the ledger entry would be

    As the Cash account has a debit balance, the opening balance would come on the debit side.

    As the Bank account has a credit balance, the opening balance would come on the credit side.

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Jasmeet_Sethi
Jasmeet_SethiCurious
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  2. GautamSaxena Curious .
    This answer was edited.

    Sundry Debtors in Trial Balance The debtor is a company's asset, and assets are always debited in the trial balance. The trial balance is a statement maintained at the end of an accounting period, listing the ending balances in each general ledger account. There are two sides to this account, debit,Read more

    Sundry Debtors in Trial Balance

    The debtor is a company’s asset, and assets are always debited in the trial balance.

    • The trial balance is a statement maintained at the end of an accounting period, listing the ending balances in each general ledger account.
    • There are two sides to this account, debit, and credit and they include all the transactions done in the business over a particular accounting period.

     

    As we know, assets, expenses, and drawings are always debited. That applies not only in journals but here as well, hence, all of your assets are to be debited.

    Trial Balance Statement

     

    As we can see here, the sundry debtors (on the 4th) are debited like all the other assets, expenses, and losses. In the end, if the basic accounting equation i.e. assets=capital+liability is violated, a mismatch arises which in the balancing figure is shown under the name of suspense account. Such errors must not be found and corrected to avoid any mismatch in the balance sheet of the company.

    Total Assets = Capital + Other Liabilities.

    Therefore, this is how the sundry debtors are treated in the Trial Balance.

     

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Simerpreet
SimerpreetHelpful
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  2. Saurav
    This answer was edited.

    Debit balance means excess of credit side over debit side. For Example- At the beginning of the year the debit balance of trade receivables is 3,000 and there is a decrease(credit) of trade receivables of 1,000 during the year and an increase(debit) of trade receivables of 4,000 then at the end therRead more

    Debit balance means excess of credit side over debit side.

    For Example- At the beginning of the year the debit balance of trade receivables is 3,000 and there is a decrease(credit) of trade receivables of 1,000 during the year and an increase(debit) of trade receivables of 4,000 then at the end there will be a debit balance of 6,000 of trade receivables at the end

    A Debit balance basically signifies all expenses and losses and all positive balances of assets. The debit balance increases when any asset increases and decreases when any asset decreases.

    Assets

    All the assets that appear in the balance sheet always have a debit balance. The debit balance under it will increase as it debits. Some of these assets can be illustrated below -:

    •  Cash and Bank Balance: Cash and Bank Balance means the amount that is held by a person in physical form or in a current/savings account.
    • Property, Plant, and Equipment-  Property Plant, and Equipment means assets that are used for the production of goods and services.
    • Account Receivables– Account Receivables means the amount that is due from debtors to whom goods were sold at credit for a specified time period.
    • Inventory – Inventory means goods that are used in the normal course of business.
    • Investments– Investments are the amount invested in other companies from which they were expecting returns in future periods.

     

    Expenses and Losses

    All expenses that appear on the debit side of the P&L account have a debit balance in their accounts.

    For eg-: A rent of 10,000 is given to the landlord under which the work has been done by the entity.

    For eg-: A depreciation of 10% is there on an asset of 12,000 will result in a debit balance under depreciation in the P&L Account.

    Some of the following expenses can be illustrated below

    • Rent- Rent means a property that an entity takes on lease for business purpose and pay a certain amount to the landlord for such lease.
    • Depreciation– Depreciation means a fall in the value of an asset due to its usage every year
    • Loss on Sale of an asset- Loss on the Sale of an Asset means the sale amount of the asset is less than its WDV
    • Printing and stationery– Printing and Stationery means the paperwork or anything related to stationery used for business purposes
    • Audit fees– Audit fees are the amount which is given to an auditor for auditing the financials of an entity
    • Salaries and Wages– Salaries and Wages are the amount given to employees for the work they have done for the entity
    • Insurance– Insurance means a premium given by an entity for insurance done by them
    • Advertising– Advertising means any promotion that a company does of its product to increase its revenue

    So after seeing all the above points we can conclude that the debit balance includes all the expenses that are in the P&L account and all the assets that are there in the Balance sheet. So its balance increases when there is an increase in its account.

     

    CREDIT BALANCE

    Credit balance means excess of credit side over debit side.

    For example, At the beginning of the year, the credit balance of trade payable is 3,000 and there is a debit of trade payable of 1,000 during the year and an increase(credit) of trade payable of 4,000 then at end there will be a credit balance of 6,000 for trade payable at the end

    .A Credit balance signifies all income and gains and all liabilities and capital that is there in business.

    Liabilities

    • Account Payables
    • Bank Overdraft
    • Bonds
    • Income Tax Payables
    • Notes Payable
    • Deferred Tax Liability

     

    Income and Gains

    • Interest Received
    • Dividend Received
    • Rent Received
    • Gains on Sale of Capital Gains

     

     

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