In The First Month Of Operations, The Total Of The Debit Entries To The Cash Account Amounted To $3,000 And The Total Of The Credit Entries To The Cash Account Amounted To $1,800. The Cash Account Has A
Actually, if the total of debit side or left side of an account is greater
than the credit side or right side, then the resulted balance is called debit
balance. Conversely, if the total of credit side is greater than the debit side
of an account, then, there is a credit balance.
Those accounts which have favorable debit balances are assets and expenses.
Liabilities, equity and revenues have favorable credit balances.
It is possible that assets have negative credit balances while liabilities
also show negative debit balances under certain circumstances. For example, in
case of Bank Overdraft i.e., if the company withdrew money than the amount
deposited into the bank account, then, cash account shows credit balance. The
excess amount of money withdrawn represent the liability account (loan from
bank) which is deducted from the next deposited money by the company.
An example of negative liabilities is when company made overdue payments to
vendors or suppliers. In that case, the negative liability is created, which
means, now, the company has right to receive more than the due payment made to
vendors. So, it represents advances to vendors and treated as current assets on
balance sheet.
There are also contra assets (accumulated depreciation, allowance for doubtful accounts, etc.), liabilities, equity (Dividend), revenues (Sales Discounts, Returns & Allowances) and expenses accounts (Purchases Discounts, Returns & Allowances) which reduce the balances of assets, liabilities, equity, revenues and expenses on financial statements in order to present the accurate, true and fair view of financial statements to its internal and external users.
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