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Which of the following in Trial Balance is contradictory to each other? __________.
- a)Inventory and Drawings
- b)Sales and Purchase Return
- c)Carriage Inward and Outward
- d)Trade Receivable and Liability
Correct answer is option 'D'. Can you explain this answer?
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Verified Answer
Which of the following in Trial Balance is contradictory to each other...
The correct option is D
A trial balance is the accounting equation of our business laid out in detail. It has our assets, expenses and drawings on the left (the debit side) and our liabilities, revenue and owner's equity on the right (the credit side).
Since inventory is an asset and drawings are expenses, both are debit items.
Sales are a form of income so go on the credit side of the trial balance.Purchases returns will reduce the expense so go on the credit side.
Carriage inwards in trial balance and Carriage outwards in trial balance are both treated as just another expense, so they are debit items
Trade receivables are revenues so are recorded on debit side and liability is recorded as a credit item.
Most Upvoted Answer
Which of the following in Trial Balance is contradictory to each other...
Contradictory Items in Trial Balance
In a trial balance, all the debit balances and credit balances should be equal. However, there are certain items that can be contradictory to each other. One such item is trade receivable and liability.
Explanation
Trade receivable refers to the amount owed by the customers for the goods or services sold on credit. It is a current asset and appears on the debit side of the trial balance. On the other hand, trade liability refers to the amount owed by the business to its suppliers for the goods or services purchased on credit. It is a current liability and appears on the credit side of the trial balance.
If the trade receivable and trade liability are equal, there is no contradiction. However, if the trade receivable is more than the trade liability, it means the business has more debtors than creditors. This could be a sign of financial instability as the business may face difficulty in collecting the outstanding amount from its customers.
On the other hand, if the trade liability is more than the trade receivable, it means the business has more creditors than debtors. This could be a good sign as the business has more time to pay its suppliers and can use the funds to invest in other areas of the business.
Therefore, the presence of trade receivable and trade liability on the same trial balance is contradictory as they represent different financial positions of the business.
Conclusion
In conclusion, the contradictory item in trial balance is trade receivable and liability. It is important for businesses to keep a balance between their debtors and creditors to ensure financial stability.
In a trial balance, all the debit balances and credit balances should be equal. However, there are certain items that can be contradictory to each other. One such item is trade receivable and liability.
Explanation
Trade receivable refers to the amount owed by the customers for the goods or services sold on credit. It is a current asset and appears on the debit side of the trial balance. On the other hand, trade liability refers to the amount owed by the business to its suppliers for the goods or services purchased on credit. It is a current liability and appears on the credit side of the trial balance.
If the trade receivable and trade liability are equal, there is no contradiction. However, if the trade receivable is more than the trade liability, it means the business has more debtors than creditors. This could be a sign of financial instability as the business may face difficulty in collecting the outstanding amount from its customers.
On the other hand, if the trade liability is more than the trade receivable, it means the business has more creditors than debtors. This could be a good sign as the business has more time to pay its suppliers and can use the funds to invest in other areas of the business.
Therefore, the presence of trade receivable and trade liability on the same trial balance is contradictory as they represent different financial positions of the business.
Conclusion
In conclusion, the contradictory item in trial balance is trade receivable and liability. It is important for businesses to keep a balance between their debtors and creditors to ensure financial stability.
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Community Answer
Which of the following in Trial Balance is contradictory to each other...
a)
Inventory and Drawings: Debit balance
b)
Sales and Purchase Return : Credit balance
C)
Carriage Inward and Outward: Debit balanced)
Trade Receivable: Debit balance and Liability : Credit balance
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Which of the following in Trial Balance is contradictory to each other? __________.a)Inventory and Drawingsb)Sales and Purchase Returnc)Carriage Inward and Outwardd)Trade Receivable and LiabilityCorrect answer is option 'D'. Can you explain this answer?
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