ACCA Applied Knowledge · Financial Accounting · Trial balance
Which one of the following balances would normally appear on the credit side of a trial balance?
The allowance for receivables normally appears as a credit balance in the trial balance. It is a contra-asset that reduces receivables. Drawings, prepayments and purchases are all debit balances, so they are shown on the debit side.
- ADrawings
- BAllowance for receivablesCorrect
- CPrepayments
- DCarrying cost of inventory purchased for resale (purchases)
Explanation
The allowance for receivables is a contra-asset with a credit balance. Drawings, prepayments and purchases are all debit balances. A common mistake is treating the allowance as a debit because it relates to receivables, which are debits.
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