ACCA Applied Knowledge · Financial Accounting · Trial balance
On which side of a trial balance would each of these balances normally appear: drawings, trade payables, and allowance for receivables?
Drawings are a debit balance, trade payables are a credit balance, and the allowance for receivables is a credit balance because it is a contra-asset that reduces receivables. Placing the allowance on the debit side confuses it with the receivables balance itself.
- ADrawings debit; trade payables credit; allowance for receivables creditCorrect
- BDrawings credit; trade payables credit; allowance for receivables debit
- CDrawings debit; trade payables debit; allowance for receivables credit
- DDrawings debit; trade payables credit; allowance for receivables debit
Explanation
Drawings reduce owner's equity and are a debit balance. Trade payables are liabilities with credit balances. The allowance for receivables is a contra-asset with a credit balance. The option showing the allowance as a debit wrongly treats it like receivables.
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