Which accounts have normal credit balances?

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Prepare for the Fundamentals of Accountancy, Business, and Management (FABM) 1 Exam. Study efficiently with multiple choice questions and detailed explanations. Enhance your knowledge and succeed in your exam with confidence.

Multiple Choice

Which accounts have normal credit balances?

Explanation:
In double-entry accounting, each account has a normal balance—the side that increases the account. Assets, expenses, and drawings normally have debit balances, while liabilities, owner’s equity, and revenues normally have credit balances. So the accounts with normal credit balances are liabilities, owner’s equity, and revenues. Credits increase these accounts, while debits would decrease them. This is why option sets containing assets, expenses, or drawings (which carry debit normals) don’t fit. Credits on liabilities, equity, and revenues reflect increases in those areas (like incurring a liability, earning revenue, or increasing owner’s equity).

In double-entry accounting, each account has a normal balance—the side that increases the account. Assets, expenses, and drawings normally have debit balances, while liabilities, owner’s equity, and revenues normally have credit balances.

So the accounts with normal credit balances are liabilities, owner’s equity, and revenues. Credits increase these accounts, while debits would decrease them. This is why option sets containing assets, expenses, or drawings (which carry debit normals) don’t fit. Credits on liabilities, equity, and revenues reflect increases in those areas (like incurring a liability, earning revenue, or increasing owner’s equity).

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