What type of account typically has a normal credit balance?

What type of account typically has a normal credit balance?

• A. Asset account
• B. Liability account
• C. Expense account
• D. Revenue account

Answer: (D)

A revenue account typically has a normal credit balance because it represents the income earned by a business from its operations. In accounting, the normal balance of different types of accounts varies: asset accounts generally have a normal debit balance, while liability and equity accounts typically have credit balances. Revenue accounts, which include sales income and service revenue, are credited when income is generated. This increases the overall equity of the business, as revenues are ultimately reflected in the profit that contributes to retained earnings. Understanding the normal balances of accounts is crucial for maintaining accurate financial statements and ensuring the integrity of financial reporting, which is foundational for effective payroll management and broader financial practices.

A revenue account typically has a normal credit balance because it represents the income earned by a business from its operations. In accounting, the normal balance of different types of accounts varies: asset accounts generally have a normal debit balance, while liability and equity accounts typically have credit balances. Revenue accounts, which include sales income and service revenue, are credited when income is generated. This increases the overall equity of the business, as revenues are ultimately reflected in the profit that contributes to retained earnings. Understanding the normal balances of accounts is crucial for maintaining accurate financial statements and ensuring the integrity of financial reporting, which is foundational for effective payroll management and broader financial practices.