Question

Boyd Docker has just rented space in a strip mall. In this space, he will open a photography studio, to be called SnapShot! A friend has advised Boyd to set up a double-entry set of accounting records in which to record all of his business transactions. Indicate whether the normal balance of each account is a debit or credit.

Answer 1

The normal balance for asset and expense accounts is a debit, while for liability, equity, and revenue accounts is a credit, as per double-entry bookkeeping principles

Step-by-step explanation:

The question asks to indicate whether the normal balance of each account in a double-entry set of accounting records is a debit or credit. To answer this, it is crucial to understand that in double-entry bookkeeping, every financial transaction affects at least two accounts, and these are in the form of debits and credits, which must balance. The normal balance for asset and expense accounts is a debit, meaning they increase with a debit and decrease with a credit. Conversely, the normal balance for liability, equity, and revenue accounts is a credit, meaning they increase with a credit and decrease with a debit.

For example, when Boyd Docker receives cash from customers for his photography services at SnapShot!, Cash (an asset account) would be debited and Service Revenue (a revenue account) would be credited. If he purchases equipment for the studio, Equipment (an asset account) would be debited and either Cash (an asset account) or Accounts Payable (a liability account) would be credited, depending on whether the payment is made immediately or on credit.