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Hallo,
As per the following example:
When a trial balance was prepared, two ledger accounts were omitted.
Discounts received $1,500
Discounts allowed $1,000
The total of debit balances exceeds/falls below the total of credit balances by $__.Answer: We have ‘missed’ income (and thus a credit balance) of $1,500 and an expense (and thus a debit balance) of
$1,000. Thus debit balances will exceed credit balances by $500.– I understand that as Disc rec’d is an income a/c with a Cr bal of 1500, Disc all’d is an expense a/c with Dr bal of 1000, so Cr 1500 > Dr 1000 by 500, why do they say that Dr > Cr by 500, is this a mistake or I’m misunderstanding something?
Thank you!
Because the entries have been missed out, the total of the credit balances will be too low by 1500 (because no discount received) and the total of the debit balances will be too low by 1000 (because no discount allowed).
The means that the total of the debit balances at the moment will be lower than the total of the credit balances at the moment.
(If you are unsure, just suppose the correct totals of both debit and credit should be 10,000. Because of the mistakes, the actual total of the debits will be 10,000 – 1,000 = 9,000; and the actual total of the credits will be 10,000 – 1,500 = 8,500. So the debits will be 500 more than the credits.)
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