Reading Balance Sheets?

Question

So, I'm a student, and I was reading over a balance sheet, and I noticed that the total of the balance sheet section debit column on the work sheet is higher than the total of the assets on the balance sheet.

My question is, Why is the asset total on the balance sheet not the same as the debit column of the balance sheet section of the worksheet?

Sorry if this is confusing..thanks :)

Answer 1

Remember the balance sheet equation Assets=Liabilities + Owners Equity. Check the worksheet journal entries and see where they are being posted. Just because Liabilities and Owners Equity typically carry a credit balance, does not mean that there can't be individual journal entries that contain debits to these accounts (how else would you decrease the balance of Liabilities and Owner Equity accounts?). Example: You pay out cash for employee wages, this would debit Wages Payable (a liability account) and credit cash (an asset account).

Answer 2

The difference between the balance sheet asset total and the worksheet debit total will be in the contra asset accounts such as the "Allowance for Doubtful Accounts" and the "Accumulated Depreciation". These accounts have credit balances. On the worksheet, they will be included in the credit total, not the debit total. On the balance sheet, these accounts reduce total assets. The numbers are correct if your WS debit balance - contra assets=BS total assets.

(the answer that has purchase discounts and purchase returns included mistakenly puts these accounts on the balance sheet column of the worksheet, these would be found in the income statement column of the worksheet, which gets closed into Retained Earnings on the Balance sheet column.)

Answer 3

Certain "Credits" are not liabilities or owner's equity. They are "Contra Assets" which means they reduce total assets.

Allowance for Doubtfull Accounts, Purchase Returns and Allowances, Purchase Discounts and Accumulated Depreciation are all credit balance accounts that go on the asset side of the balance sheet.