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If you were to prepare a trial balance for the company, what would be the sum of debits?

User Godel
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Final answer:

When preparing a trial balance, the sum of debits must equal the sum of credits. This reflects the double-entry accounting system where each transaction is entered twice to keep the accounts balanced. In applying this to a bank, one would list down assets and liabilities to calculate the net worth and ensure the sums are equal on both sides of the T-account balance sheet.

Step-by-step explanation:

If you were to prepare a trial balance for the company, the sum of debits must equal the sum of credits. This is because a trial balance is a bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns. Every transaction is entered twice, once as a debit and once as a credit, to maintain the accounting equation which is Assets = Liabilities + Equity. So, in essence, the sum of debits should match the total sum of credits if the books are balanced.

For example, in the case of the bank mentioned, setting up a T-account balance sheet involves listing down the assets, including reserves of $50, government bonds worth $70, and loans of $500, and liabilities, which are the deposits of $400. To calculate the net worth, you would subtract the total liabilities from the total assets. In a balanced account, the sum on both sides of the T-account (debits and credits) should be equal

User Korun
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