Check out some similar questions!

janeG_ · Sep 29, 2009, 05:22 PM

I was told that in a trial balance sheet, when an Asset account (for example: supplies account) has a negative balance, the negative balance is put on the credit side of the trial balance sheet.

But I thought Asset accounts are always a debit balance and if it did have an ending balance that is negative it would still be on the DEBIT side expect in brackets to symbolize that it is a negative balance, (for example: supplies =-$ 500, it would be in the debit column but looking like : (500), so that when we calculate the total of the debit column we know to subtract and not add).

please correct me if I'm wrong! Thanks!

rehmanvohra · Sep 29, 2009, 10:46 PM

I trial balance is a list of balances extracted from the general ledger. Each account is reflected as a debit or a credit as it appears in the general ledger. It is not usual to show negative balances of an asset in parentheses.

It is strange that an asset account has a credit balance instead of the usual debit balance. It is necessary to determine what actually is the reason for this. There can be many reasons, some them are:

1. The accountant may have failed to record the purchase of supplies made before the year end.
2. The accountant may have recorded issues of supplies more than once for the same transaction.
3. The ledger account may have been incorrectly totalled.
4. A debit entry may have been posted as a credit.

I would personally prefer to check the supplies account thoroughly to locate the reason.

Please remember it is just a trial balance and not trial balance sheet

morgaine300 · Sep 30, 2009, 02:55 AM

I have to pretty much agree. First, if it really has a credit balance, it stays a credit. Being on the credit side in and of itself indicates that it's negative.

Not to mention that you really do need to find out why it's negative. Some assets, like cash, could go negative if you're overdrafting the account. However, since you have to put that money back into the bank, it's technically a liability to the bank, not a negative cash. (That's the proper way, but I've seen small companies just leave the negative cash.)

But there are other assets, like the supplies you mentioned, that literally can't be negative. How do you have negative supplies? How do you have a negative piece of equipment? Something has definitely been recorded incorrectly there.

janeG_ · Sep 30, 2009, 09:18 AM

I don't know how an asset account would end up with a negative balance, the negative supplies account was a part of my teaching assistant's example of when an asset account would appear in the credit column (she said when it's negative), of the trial balance. And I wasn't sure if she was correct because she was wrong on many previous occasions.

I just remembered being taught that Assets account totals are debit balances no matter what and I didn't understand the reason she claimed it would be a credit balance if it had a negative balance. She never really explained why and it just doesn't make sense to put it in the credit column.

rehmanvohra · Sep 30, 2009, 09:46 AM

Only your teacher can best explain the reason. Can you please ask her to explain. Please be decent to her so as not to offend her. Give her your understanding and ask her opinion.

janeG_ · Sep 30, 2009, 04:55 PM

But that's the thing, I told her that I didn't understand why and she refused to explain any further and told me that class was over. But thanks, this has been helpful and other people have told me that asset accounts shouldn't normally have a negative ending balance. Thanks again.

morgaine300 · Sep 30, 2009, 05:35 PM

I think when you were taught that asset accounts should "have a debit balance no matter what," I have a feeling you may have been over-interpreting the fact that assets "should" have a debit balance because that's the rule they follow. That is where they are supposed to be, yes.

But when you're taught that rule, we're assuming under perfect circumstances. So saying cash "should" be a debit -- well, yeah, it should be, meaning that if it has a credit balance, something's wrong and you have to check out what -- not that it literally can't have one. Mathematically, yes it can go to the credit side. A negative flips over there cause it means the credits (subtractions) got bigger than the debits (additions). But it still means something is wrong.

She did it correctly. She should, however, have made a strong point that it shouldn't come out that way and that it's a sign that something is screwy.

rehmanvohra · Sep 30, 2009, 09:29 PM

Originally Posted by janeG_

but that's the thing, I told her that I didn't understand why and she refused to explain any further and told me that class was over. but thanks, this has been helpful and other people have told me that asset accounts shouldn't normally have a negative ending balance. thanks again.

Perhaps you should try and meet her out of the class. It is her duty to make the student understand the subject.