Lumen Lab Supplies extracted the five balances shown below at 31 December. Complete the table by identifying the column of the trial balance in which each b...

The column follows from what kind of account the balance is. Assets, expenses and drawings carry debit balances; liabilities, capital, income and the accounts that are deducted from assets carry credit balances.

Why each balance falls in that column:

1. Inventory of glassware is goods held for resale, a current asset, so it is a debit balance.
2. The allowance for irrecoverable debts is deducted from trade receivables, so it accumulates as a credit rather than being an asset in its own right.
3. Discount received is income earned by paying suppliers promptly, so it is a credit balance.
4. Carriage outwards is the cost of delivering goods to customers, an expense, so it is a debit balance.
5. A bank overdraft is money owed to the bank, a current liability, so it is a credit balance.

Three of these are commonly placed in the wrong column. The allowance for irrecoverable debts looks as though it belongs with trade receivables on the debit side, but it reduces that asset, so its own balance is a credit. Discount received is often confused with discount allowed: received is income and is credited, allowed is an expense and is debited. An overdraft is the bank account standing in credit, the opposite of the debit balance a bank account normally shows, because the business now owes the bank rather than the other way round.

Total .