Interpreting Accounts & Their Balances (Cambridge (CIE) IGCSE Accounting)

At the start of an accounting period, the balance on an asset account will be on the debit side

At the start of an accounting period, the balance on a trade receivables account will usually be on the debit side

A trade receivable account could start 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

At the start of an accounting period, the balance on a liability account will be on the credit side

At the start of an accounting period, the balance on a trade payable account will usually be on the credit side

A trade payable account could start 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

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 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 start of an accounting period, the balance on the drawings account will be zero

At the start of an accounting period, the balance on the capital account will be on the credit side