A credit balance in a bank column of the trial balance generally indicates what?
Correct answer: D. A bank overdraft
- A. A bank loan paid in advance
- B. Cash held in the office
- C. A deposit in transit
- D. A bank overdraft
Explanation
A credit balance in the bank account normally represents an overdraft, because the business owes money to the bank. A favourable bank balance is usually shown as a debit balance.
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About Ledger Accounts and the Trial Balance
Ledger accounts collect transactions under individual headings and use debit and credit sides to determine balances. The trial balance lists those balances to check arithmetical agreement before financial statements are prepared, but it does not reveal every error, such as complete omission, compensating errors or entries made in the wrong account.
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Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Ledger Accounts and the Trial Balance questions
What does an agreement of the debit and credit totals of a trial balance mainly confirm?
Which item normally has a credit balance in a trial balance?
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When a transaction affects more than two accounts, the journal entry is known as what?
Which type of error is most likely to make the trial balance totals disagree?
Which account is normally debited when the owner introduces additional cash as capital?