Interpreting Accounts & Their Balances | Accounting for GCSE/IGCSE - Year 11 PDF Download

Accounts for Assets

How do I interpret ledger accounts for non-current assets?

• Non-current assets typically start an accounting period with a debit balance.

How do I interpret ledger accounts for trade receivables?

• Typically, at the commencement of an accounting period, the balance of a trade receivables account is usually on the debit side.
• However, a trade receivable account might initiate on the credit side under specific circumstances:
  • If a credit customer has returned goods to the business.
  • When the goods have already been paid for.
  • But the business hasn't yet refunded the credit customer.

Accounts for Liabilities

How to Understand Ledger Accounts for Liabilities?

• At the beginning of an accounting period, the balance in a liability account typically resides on the credit side.

How do I interpret ledger accounts for trade payables?

• At the commencement of an accounting period, the balance in a trade payable account is usually on the credit side.
• A trade payable account might initiate on the debit side if:
  • The business returns goods to a credit customer.
  • The goods are already paid for, yet the credit supplier has not refunded the business.
  • And the goods have been previously paid for
  • However, the credit supplier has not yet reimbursed the company

Accounts for Expenses & Incomes

How do I interpret ledger accounts for expenses?

• At the commencement of an accounting period, the balance on an expense account should ideally be zero, unless there's an accrued or prepaid expense.
• In case the business has made an early payment towards an expense for the current period, a starting balance might exist on the debit side, known as a prepaid expense.
• Conversely, if the business still owes money for an expense from the previous period, there could be a starting balance on the credit side, termed as an accrued expense.

How do I interpret ledger accounts for incomes?

• At the onset of an accounting period, an income account ideally begins with a balance of zero, unless there are instances of accrued or prepaid income.
• A starting balance may appear on the debit side if the business anticipates income that should have been received in the previous period, referred to as accrued income.
• Conversely, a starting balance may exist on the credit side if the business receives payments in advance for the current period, termed prepaid income.

Accounts for Capital & Drawings

How do I interpret ledger accounts for drawings?

• At the beginning of an accounting period, the drawings account should have a balance of zero.

How do I interpret ledger accounts for capital?

• At the beginning of an accounting period, the balance on the capital account will typically be on the credit side.