Interpreting Accounts & Their Balances
Accounts for assets
Accounts for assets
How do I interpret ledger accounts for non-current assets?
At the start and end of an accounting period, the balance on an asset account will be on the debit side
Account is debited when: | Account is credited when: |
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How do I interpret ledger accounts for trade receivables?
At the start and end of an accounting period, the balance on a trade receivables account will usually be on the debit side
A trade receivable account could start or end on the credit side
If the credit customer has returned goods to the business
And the goods have already been paid for
But the business has not yet refunded the credit customer
Account is debited when: | Account is credited when: |
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Accounts for liabilities
Accounts for liabilities
How do I interpret ledger accounts for liabilities?
At the start and end of an accounting period, the balance on a liability account will be on the credit side
Account is debited when: | Account is credited when: |
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How do I interpret ledger accounts for trade payables?
At the start and end of an accounting period, the balance on a trade payable account will usually be on the credit side
A trade payable account could start or end on the debit side
If the business has returned goods to a credit customer
And the goods have already been paid for
But the credit supplier has not yet refunded the business
Account is debited when: | Account is credited when: |
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Accounts for expenses & incomes
Accounts for expenses & incomes
How do I interpret ledger accounts for expenses?
At the start of an accounting period, the balance on an expense account should be zero
Unless there is an accrued or prepaid expense
There could be a starting balance on the debit side
if the business has made an early payment toward the expense for the current period
This is called a prepaid expense
There could be a starting balance on the credit side
if the business still owes money for an expense for the previous period
This is called an accrued expense
At the end of an accounting period, the balance on an expense account should be on the debit side
Account is debited when: | Account is credited when: |
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How do I interpret ledger accounts for incomes?
At the start of an accounting period, the balance on an income account should be zero
Unless there is accrued or prepaid income
There could be a starting balance on the debit side
if the business is waiting for money that should have been received in the previous period
This is called accrued income
There could be a starting balance on the credit side
if the business receives payments early for the current period
This is called prepaid income
At the end of an accounting period, the balance on an income account should be on the credit side
Account is debited when: | Account is credited when: |
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Accounts for capital & drawings
Accounts for capital & drawings
How do I interpret ledger accounts for drawings?
At the start of an accounting period, the balance on the drawings account will be zero
At the end of an accounting period, the balance on the drawings account will be on the debit side
Account is debited when: | Account is credited when: |
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How do I interpret ledger accounts for capital?
At the start and end of an accounting period, the balance on the capital account will be on the credit side
Account is debited when: | Account is credited when: |
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