ACCA Applied Knowledge · Financial Accounting · Double-entry bookkeeping principles including the maintenance of accounting records
Which of the following account balances would normally be a credit balance in the general ledger of a trading entity?
Trade payables normally carry a credit balance because they are liabilities, and liabilities increase with credits. Prepayments and inventory are assets with debit balances, and drawings are a debit that reduces the owner's equity in the business.
- APrepayments
- BTrade payablesCorrect
- CDrawings
- DInventory
Explanation
Liabilities have credit balances, so trade payables are normally credit. Prepayments and inventory are assets (debit balances), and drawings reduce equity so carry a debit balance.
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