What does a debit balance in a personal account generally indicate?
Correct answer: A. The person or entity owes money to the business
- A. The person or entity owes money to the business
- B. The business owes money to the person or entity
- C. The person has introduced permanent capital
- D. The account represents an income earned by the business
Explanation
A debit balance in a personal account usually means the account holder is a debtor and owes money to the business. A credit balance generally indicates that the business owes money to that person or entity.
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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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