Initial Trial Balance with no transactions

Question

Considering this trial balance report: 
 
 balance.pdf 
 
 This is an exercise for school where the directions are sparse. So far as I can see, the initial amounts match the requirement. Looking at the accounts 2670 HST Paid on Purchases this would seem to be an asset, to my understanding. Yet it's listed as a liability in the Chart of Accounts. 
 To get the trial balance to balance, which are initial amounts with no General Journal Entries, I entered the initial amount for this account as a negative. Chart of Accounts as: 
 
 COA.pdf 
 
 I'm trying to understand the significance of the negative balance in this context, as it relates to this account being listed as a liability in the COA and yet being an asset from a different perspective.

Christopher Parrish · Accepted Answer

Hello Nicholas Saunders, 
 I'll do my best to explain things. Let&rsquo;s start in the abstract. Assets and Liabilities are determine by account number, not account balance. 2670 is a liability account. Sage 50 knows what type of balance accounts typically have. Assets typically have debit balances and liabilities typically have credit balances. However, this is not always the case. As you've already seen, if you enter opening balances as a negative number, it will flip the balance from what it would normally be. So for 2670 it would be a debit balance instead of a credit balance. 
 This can happen for a variety of reasons, but in this specific case it is because sales tax is typically refundable. The chart of accounts is typically set up this way because you need to know how much sales tax the business charged on sales and then subtract how much the business was charged on purchases to get a net amount. I'm sure the material you are covering will go into this at some point if it has not already. 
 Hopefully that helps. 
 Thanks, Chris Parrish

Sage 50

Initial Trial Balance with no transactions

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