Question

Interest on loan effects when given in trial balance

Answer 1

If the debit side of an account is heavier than its credit side, the balance is called----------------------------.
2. The left hand side of a Ledger Account is used as a -------------- and the right hand side is used as a --------------------.
3. -----------------and ---------------- Accounts may have debit or credit balance.
4. Debit balance of the -----------Account shows that person owes to the firm. It means he is the ------------of the firm.
5. Credit balances of the Nominal Account shows total --------------------------for the period.
6. Real accounts always have -------------- balance.
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TRIAL BALANCE
SOME IMPORTANT ITEMS AND THEIR BALANCES
1. Capital : Credit balance
2. Drawings : Debit balance
3. Purchases : Debit balance
4. Expenses : Debit balance
5. Incomes : Credit balance
6. Carriage Inwards : Debit balance
7. Carriage Outwards : Debit balance
8. Stock (opening) : Debit balance
9. Loan taken : Credit balance
10. Interest paid : Debit balance
11. Loan given : Debit balance
12. Interest received : Credit balance
13. Assets : Debit balance
14. Suppliers : Credit balance
15. Sales Return : Debit balance
16. Purchases : Debit balance
17. Return Outwards : Credit balance
18. Investments : Debit balance
19. Goodwill : Debit balance
20. Cash : Debit balance
Note : Closing stock should not be taken in trial balance.
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Answer 2

Explanation:

Record the Loan Interest

In your bookkeeping, interest accumulates on the same periodic basis even if the interest is not due. This interest is debited to your expense account and a credit is made a liability account under interest payable for the pending payment liability.