Final answer:
true. The statement that the normal balance is the side which increases the account is true. Debits typically increase assets, while credits increase liabilities and equity. This is fundamental in maintaining the accounting equation of Assets = Liabilities + Equity.
Step-by-step explanation:
true. The statement is true: the normal balance refers to the side (debit or credit) that increases an account's value. In accounting, T-accounts are used to represent accounts, with the left side indicating debits and the right side indicating credits. Assets, expenses, and losses typically have a debit normal balance, meaning an increase in these accounts is recorded as a debit.
Conversely, liabilities, equity, revenue, and gains usually have a credit normal balance, and increases are entered as credits. The T-account structure ensures that a bank's or a company's assets always equal liabilities plus net worth. A healthy bank or business will have a positive net worth, while a bankrupt one will have a negative net worth. Overall, within the T-account framework, transactions are recorded to maintain the fundamental accounting equation: Assets = Liabilities + Equity, which always has to be in balance.