Which of the following groups normally has a credit balance?
Liabilities, revenue, and owner's capital accounts normally have credit balances.
| Normal Balance | Examples | |
|---|---|---|
| Liabilities | Credit | Notes Payable Accounts Payable Debentures Bonds Payable |
| Owner's Equity | Credit | Common Stock Retained Earnings Preferred Stock Additional Paid-In-Capital |
| Revenues | Credit | Service Revenue Sales |
| Expenses | Debit | Salaries Expense Tax Expense Rent Expense Supplies Expense |
Revenue, liability, and retained earnings normally have credit balances (retained earnings are part of equity). When these accounts increase, they are credited and thus would normally have a credit balance.
Liability, revenue, and owner's capital accounts normally have credit balances.
The balance on a liability or capital account is always a credit balance. (Later on in this section you will learn how to work out the final or closing balance on an account which has both debit and credit entries.
Credit: Liabilities, revenues and sales, gains, and owner equity and stockholders' equity accounts normally have credit balances. These accounts will see their balances increase when the account is credited. Their balances will decrease when they debited.
Cash, equipment, and inventory are all examples of assets. Assets have a normal debit balance. This means that when you increase an asset account, you make a debit entry. For instance, when a business buys a piece of equipment, it would debit the Equipment account.
Accounts Receivable is always have a normal debit balance because this is part of Assets and all asset accounts has a final debit balance. While Accounts Payable should have a credit balance because it is part of the Liabilities account and all liabilities account has normal credit balance.
Accounts where a credit balance is NOT the normal balance include the following: Asset accounts (other than contra asset accounts such as Allowance for Doubtful Accounts and Accumulated Depreciation) Expense accounts (other than a contra expense account)
Liability accounts will normally have credit balances and the credit balances are increased with a credit entry. Recall that credit means right side. In the accounting equation, liabilities appear on the right side of the equal sign.
Do asset accounts have a credit balance?
You usually don't have a credit balance on asset accounts because by definition that would make them a liability, but there is an asset account specifically designed to carry credit balances. They're called contra asset accounts.
Answer and Explanation:
Unearned Revenue and Accounts Payable are liability accounts and Common Stock is an equity account. These accounts have a normal credit balance. Hence, they are increased with credits.
A credit balance on your billing statement is an amount that the card issuer owes you. Credits are added to your account each time you make a payment. A credit might be added when you return something you bought with your credit card.
The correct answer is: b) Dividends declared
Trial balance is a bookkeeping worksheet in which all the accounting entries are shown. When the adjusted trial balance is represented the dividends do not account for the credit balance.
Assets and expenses have a normal debit balance. On the other hand, accounts that have a normal credit balance include liabilities, owner's equity, and revenue.
The asset, expense, and dividend accounts have a normal debit balance. The balances of these accounts increase when debited and decrease when credited. On the other hand, liability, equity, revenue, and retained earnings account has a normal credit balance.
A normal balance is the side of the T account where the balance is normally found. When an amount is accounted for on its normal balance side, it increases that account. On the contrary, when an amount is accounted on the opposite side of its normal balance, it decreases that amount.
Normal Balance of an Account
The normal balance is the expected balance each account type maintains, which is the side that increases. As assets and expenses increase on the debit side, their normal balance is a debit. Dividends paid to shareholders also have a normal balance that is a debit entry.
Accounts Receivable will normally (In your class ALWAYS) have a debit balance because it is an asset.
Accounts receivable is a debit, which is an amount that is owed to the business by an individual or entity.
Does an owner's equity account normally have a credit balance?
Equity, or owner's equity, is generally what is meant by the term “book value,” which is not the same thing as a company's market value. Equity accounts normally carry a credit balance, while a contra equity account (e.g. an Owner's Draw account) will have a debit balance.
Conversely, an increase in liabilities is a credit because it signifies an amount that someone else has loaned to you and which you used to purchase something (the cause of the corresponding debit in the assets account).
Explanation: A liability account is an account in the chart of account which shows how much a company owes. The normal balance side of a liability account is, therefore, the credit side and not the debit side.
Assets have adjusting accounts called Contra Accounts. The best example is the account called Accumulated Depreciation. It holds the sum total of all of the depreciation expense recognized since the Asset was acquired. It's balance is generally a credit balance.
Answer and Explanation: Supplies cannot have a credit balance because supplies are considered a current asset and therefore, should have a debit balance. A credit balance would imply that the company owes supplies (like a liability).
