Account Balances
• Occasionally an account that normally
has a debit balance, will end up with a
credit balance and vice versa.
• This is called an Exceptional Balance
Exceptional Balances
• An Asset has a Credit balance
• A Liability has a Debit balance
• Capital has a Debit balance
A/R
550
A/P
555
850
5
5
Capital
845
1000
100
900
Examples of Why Exceptional
Balances Happen
• Your business overpays an accounts
payable
• A customer with no account balance
returns unsatisfactory merchandise
• A purchaser returns goods for credit to a
supplier with whom there is no account
balance.
Exceptional balances do not last long.
They usually return back to normal with
regular business activity.
Example: Bookkeeping FOR BELL
1.
2.
Bell Canada sends Mr. Huff his Bell phone Bill of $56
for telephone services provided in the month of
September.
Mr. Huff recently overpaid her Bell phone bill which
was $56 dollars and instead he paid $65. Bell Canada
has not earned the extra $9 so they cannot count that
as their revenue.
Dealing with Exceptional Balances
• Double check your accounts – may be an
error
• In theory
• Assets with exceptional balances
becomes a Liability but stays in the assets
section of the Balance Sheet as a negative
• Liabilities with an exceptional balance in
theory become an asset, but stay in the
liabilities section of the balance sheet as a
negative.
Terms – Bank /Cash
• Bank/Cash
– Terms are used interchangeably
– Usually Cheques or ETF (electronic fund
transfer) is used
– Going forward will refer to as BANK
– Cash or cheque is used interchangeably but
both mean that an item is paid for a the time it
is purchased.
Terms – On Credit
• Buying/Selling on credit
– The purchaser is able to delay payment for a
short period of time, usually 30 days
– Gives the purchaser time to inspect the goods
and return any defective items.
– If a business is buying goods on credit = +
A/P
– If a business selling goods on credit = + A/R
Terms – On account
• Purchase on account – not paid for at
time of purchase (like buying on credit)
• Sale on account – cash is not received at
the time it is sold (like selling on credit)
• Payment on Account – money is paid out
to a creditor to decrease amount owed
• Receipt on Account – money is received
from a debtor to reduce the amount owed.
• Purchased on Account
An Asset
A/P
debit
credit
• Sold on Account
Accounts Receivable
debit
Capital
credit
• Paid on Account
Bank
credit
Accounts Payable
debit
• Received on Account
Bank
debit
Accounts Receivable
credit