Sundry Debtors (Accounts Receivable) And Sundry Creditors (Accounts Payable) In Trial Balance

What If In A Trial Balance, Sundry Debtors And Sundry Creditors Balances Are Shown On Both Debit And Credit Column, Then What Will Be Its Effect In Balance Sheet?

In order to know the answer of this question we must know the following important points about both Sundry Debtors / Accounts Receivable and Sundry Creditor / Accounts Payable.

Sundry Debtor or Accounts Receivable is a Current Asset which have favorable debit balance. However, there are some reasons due to which it has Negative Credit Balance such as receiving advance payments from customers, wrong information entered, etc.

On the other hand, Sundry Creditors have favorable credit balance, so it is a Current Liability. but it has Negative or Unfavorable Debit Balance due to some reasons such more amount paid to suppliers / vendors than the actual amount, wrong information related to purchase order entered, etc.

Accounting Treatments of Sundry Debtors or Accounts Receivable And Sundry Creditors / Accounts Payable Shown In Trial Balance

                                For Sundry Debtors or Accounts Receivable

(i) If only the debit balance of Accounts Receivable / Debtor is shown in the trial balance on debit column, then it will be go to the balance sheet as a current asset.

(ii) If only the credit balance of sundry debtor is shown on credit column, then it will be transferred to balance sheet as a current liability with the account’s name “Advances from Customers”.

(iii) If both debit and credit balances of sundry debtor are shown in trial balance, then these two debit and credit balances are set off and the net debit or credit balance will go to the balance sheet.

                                For Sundry Creditors / Accounts Payable

(i) If the credit balance of creditors is shown in trial balance, then it will be transferred to balance sheet as a current liability.

(ii) If the debit balance of creditors is shown in trial balance, then the debit balance will be go to the balance sheet as a current asset with the account’s name “Advances To Suppliers”.

(iii) If there is both credit and debit balances of sundry creditors shown in trial balance, then both credit and debit balances are set off and the remaining net credit or debit balance will be transferred to the balance sheet accordingly.

So, after studying above points, now come to the answer of question that what we do if both sundry debtors and sundry creditors show debit and credit balances in a Trial balance.

Simply, we apply the following rule as shown below:

                             Debit - Credit = Debit Balance (If Debit is more than Credit)

                             Credit - Debit = Credit Balance (If Credit is more than Debit)

 

Let Suppose, we have Sundry Debtor of Rs. 50000 on Debit and Rs. 30000 on Credit Column of Trial balance. In that case the net balance of sundry debtors will be a debit balance of Rs. 20000 (debit amount of Rs. 50000 - Credit amount of Rs. 30000), because Debit balance is more than Credit balance so debit balance of Rs. 20000 will be shown on the balance sheet as a current asset.

Similarly, if Sundry Creditors on trail balance is shown as:

On Credit is Rs. 70000 and on Debit Column is Rs. 40000, then the net balance of Sundry Creditors will be a credit balance of Rs. 30000 to be shown as a current liability on the balance sheet.

In the reverse situation i.e., if the debit balance of Rs. 30000 of Sundry Debtor is more than credit balance of Rs. 40000, then we create an account of Advances To Customers as a current liability on the balance sheet. Similarly, if the credit balance of sundry creditor is Rs. 20000 and debit balance is Rs. 40000 in Trial balance, then we create an account of Advances To Suppliers as a Current Asset on the balance sheet.

Hopefully, now you will understand the answer to the question.