Question

For the following accounts used by a retail business, determine the normal balance of each account (i.e., does the account normally have a debit or a credit balance)?

Answer 1

The normal balances for accounts used by a retail business depend on the type of account. Assets and expenses have debit balances, while liabilities, equities, and revenues have credit balances.

Step-by-step explanation:

The normal balance of an account in accounting refers to whether the account normally has a debit or a credit balance. The normal balances for the following accounts used by a retail business are:

• Assets accounts, such as Cash and Inventory, normally have a debit balance.
• Liabilities accounts, such as Accounts Payable and Loans Payable, normally have a credit balance.
• Equity accounts, such as Owner's Capital and Retained Earnings, normally have a credit balance.
• Revenue accounts, such as Sales and Service Revenues, normally have a credit balance.
• Expense accounts, such as Rent Expense and Cost of Goods Sold, normally have a debit balance.