which of the following accounts has a normal credit balance A. accounts payable B. accounts receivable C. Supplies expense D. T. Stark Capital.
The Correct Answer and Explanation is:
Correct Answer: A. Accounts Payable
Explanation:
In accounting, every account has a “normal balance,” which refers to the side—debit or credit—where increases to the account are recorded. Understanding normal balances is crucial for accurate bookkeeping and financial reporting.
Accounts are typically classified into five main categories: Assets, Liabilities, Equity, Revenues, and Expenses. Each of these categories follows a general rule regarding normal balances:
- Assets (e.g., Accounts Receivable, Supplies) have a normal debit balance.
- Liabilities (e.g., Accounts Payable) have a normal credit balance.
- Owner’s Equity (e.g., Capital accounts like T. Stark, Revenues) also have a normal credit balance.
- Expenses (e.g., Supplies Expense) have a normal debit balance.
- Revenues have a normal credit balance.
Accounts Payable is a liability account. It represents the amount a business owes to suppliers or creditors for goods or services received on credit. Since liabilities increase on the credit side, the normal balance of Accounts Payable is a credit. Any increase in payables is recorded as a credit entry, and any payment made to reduce the liability is recorded as a debit.
Accounts Receivable, in contrast, is an asset account. It records amounts owed to the business by customers. Assets increase with debits, so its normal balance is a debit.
Supplies Expense is an expense account, which also has a normal debit balance because expenses decrease owner’s equity.
T. Stark, Capital is an owner’s equity account and has a normal credit balance. While it shares the same normal balance as liabilities, it is not the best answer here because the question asks for the account with a normal credit balance among all listed options. Accounts Payable most directly fits this requirement as a liability.
Therefore, Accounts Payable is the correct choice as the account with a normal credit balance.
