Types of ledger balances MCQs Quiz | Class 9
This quiz is for Class IX students studying Elements of Book-Keeping & Accountancy (Code 254), focusing on Unit 5: Ledger. It covers key concepts such as the difference between a debit balance and a credit balance, along with typical examples for various account types. Attempt all questions and submit to see your score, review your answers, and download a PDF of your answer sheet.
Understanding Ledger Balances
In accounting, after all transactions for a period are recorded in the journal and posted to the ledger, each ledger account is balanced. The ‘balance’ of an account is simply the difference between the total of the debit side and the total of the credit side. This balance is crucial as it summarizes the net position of that account and is used to prepare the Trial Balance and subsequent financial statements.
Debit Balance vs. Credit Balance
An account can have either a debit balance or a credit balance. The type of balance an account normally holds depends on its nature.
Debit Balance
An account is said to have a debit balance when the total of the debit side is greater than the total of the credit side (Total Debits > Total Credits). The following types of accounts typically show a debit balance:
- Assets: Things of value owned by the business (e.g., Cash, Machinery, Building, Debtors).
- Expenses/Losses: Costs incurred in the process of earning revenue (e.g., Salaries, Rent Paid, Purchases).
- Drawings: Money or goods withdrawn by the owner for personal use.
For example, the Cash Account will always have a debit balance or a zero balance, as you cannot spend more cash than you have.
Credit Balance
An account is said to have a credit balance when the total of the credit side is greater than the total of the debit side (Total Credits > Total Debits). The following types of accounts typically show a credit balance:
- Liabilities: Amounts owed by the business to outsiders (e.g., Creditors, Bank Loan).
- Capital: The amount invested in the business by the owner.
- Income/Gains/Revenue: Money earned by the business (e.g., Sales, Commission Received, Rent Received).
For example, the Sales Account represents revenue and will always have a credit balance.
Summary of Normal Balances
This table provides a quick reference for the normal balance of different types of accounts based on the rules of accounting.
| Account Type | Normal Balance | Meaning | Examples |
|---|---|---|---|
| Asset | Debit | What the business owns | Cash, Building, Debtors |
| Liability | Credit | What the business owes | Creditors, Bank Loan |
| Capital | Credit | Owner’s investment in the business | Capital Account |
| Expense / Loss | Debit | Costs incurred by the business | Salaries Paid, Purchases |
| Income / Gain | Credit | Revenue earned by the business | Sales, Interest Received |
Quick Revision Points
- Balancing: The process of finding the difference between the two sides of a ledger account.
- A debit balance means the debit side is heavier. This is typical for assets and expenses.
- A credit balance means the credit side is heavier. This is typical for liabilities, capital, and income.
- The balance of an account is carried forward to the next accounting period.
- All these account balances are listed in a statement called the Trial Balance to check arithmetical accuracy.
Extra Practice Questions
- What type of balance would the ‘Wages Paid’ account have?
- If a business sells goods on credit to Mr. Sharma, what will be the normal balance of Mr. Sharma’s account in the business’s books?
- What does a credit balance in the ‘Bank Loan Account’ signify?
- The ‘Sales Account’ always has which type of balance and why?
- Why does the ‘Machinery Account’ typically have a debit balance?
