Credit balances for liabilities in the general ledger

Steps:

• Classify accounts: expenses owing as liability (credit balance), expenses prepaid as asset (debit balance), income owing as asset (debit balance), income received in advance as liability (credit balance).
• At year-end, adjustments create these balances, which carry forward unchanged to the new year.
• Debit balances (prepaid expenses, owing income) appear on debit side; credit balances (owing expenses, advance income) on credit side.
• Thus, credit-side balances brought down are income received in advance and expenses owing.

Why C is correct:

• Matches the two liability accounts with credit balances per double-entry accounting rules.

Why the others are wrong:

• A: Includes expenses prepaid (debit balance, not credit).
• B: Reverses order of the credit balance pair, mismatching ledger presentation sequence.
• D: Includes expenses prepaid (debit) with income received in advance (credit).

Final answer: C