BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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credit balances.
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debit balances.
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debit and credit balances.
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debit or credit balances.
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Detailed explanation-1: -Assets and expenses have natural debit balances. This means that positive values for assets and expenses are debited and negative balances are credited. For example, upon the receipt of $1, 000 cash, a journal entry would include a debit of $1, 000 to the cash account in the balance sheet, because cash is increasing.
Detailed explanation-2: -Typically, when reviewing the financial statements of a business, Assets are Debits and Liabilities and Equity are Credits.
Detailed explanation-3: -Assets normally have debit balance and Liabilities and Equity normally have credit balance. Since Revenues increase Equity, they also normally have a credit balance and since Expenses decrease Equity, they normally have a debit balance.
Detailed explanation-4: -Correct Answer: Option (b) Assets normally show a debit balance. The accounting rule states that all the assets are debited.
Detailed explanation-5: -Assets, expenses, losses and the owner’s drawing account will normally have debit balances.