In the trial balance of a sole trader, which of the following accounts would typ

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Question: In the trial balance of a sole trader, which of the following accounts would typically have a credit balance?

Options:

Correct Answer: Capital

Solution:

The Capital account typically has a credit balance in the trial balance of a sole trader.

In the trial balance of a sole trader, which of the following accounts would typically have a credit balance?

In the trial balance of a sole trader, which of the following accounts would typically have a credit balance?

Step 1: Understand what a trial balance is. A trial balance is a list of all the accounts in a business and their balances at a specific time.
Step 2: Know that accounts can have either a debit balance or a credit balance. A debit balance means the amount is owed to the account holder, while a credit balance means the account holder has money in that account.
Step 3: Identify the types of accounts in a sole trader's trial balance. Common accounts include Capital, Assets, Liabilities, Income, and Expenses.
Step 4: Recognize that the Capital account represents the owner's investment in the business. This account usually has a credit balance because it shows the owner's equity.
Step 5: Conclude that in the trial balance of a sole trader, the Capital account typically has a credit balance.

Trial Balance – A trial balance is a statement that lists all the balances of the general ledger accounts of a business at a specific point in time, ensuring that total debits equal total credits.
Credit Balance Accounts – Accounts that typically have a credit balance include liabilities, equity (such as the Capital account), and revenue accounts.