A credit balance in a bank column of the trial balance generally indicates what?
Correct answer: A. A bank overdraft
- A. A bank overdraft
- B. Cash held in the office
- C. A deposit in transit
- D. A bank loan paid in advance
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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