Question

An employee working on her first trial balance discovers that the Furniture and Equipment account has...

  1. An employee working on her first trial balance discovers that the Furniture and Equipment account has a credit balance of $5 000 and a customer's account has a credit balance of $200. Has the accountant made a mistake in her records or is this situation possible? Explain
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Answer #1

For Furniture and Equipment

A credit balance of $5,000 in furniture and equipment is generally not possible. Any Purchase of fixed asset is debitted to the respective ledger and the cost of the asset is amortized over the life of the asset by crediting the asset ledger. Even at the time when asset is disposed off, if there is a gain, it is separately recorded and thus there is a very unlikely that fixed asset account can go negative.

For Customer Account

A credit balance of $200 in customer account is possible as there could be an advance from the customer for delivery of good.

Feel free to ask for any clarification, if required. Kindly provide feedback by thumbs up. It would be highly appreciated. Thank You.

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