Which of the following accounts has a normal credit balance? A selling expense B Sales Discounts C sales returns and allowances D sales revenue
The Correct Answer and Explanation is:
Correct Answer: D. Sales Revenue
Explanation:
In accounting, normal balances refer to the side of an account (debit or credit) that increases the value of that account. To understand which accounts have normal credit balances, it’s helpful to know the basic types of accounts and their typical balances:
- Assets → Normal debit balance
- Liabilities → Normal credit balance
- Equity (Capital) → Normal credit balance
- Revenues → Normal credit balance
- Expenses → Normal debit balance
- Contra accounts → Have a balance opposite to the normal balance of the account they relate to
Now, let’s examine each option:
A. Selling Expense – This is an expense account. It includes costs incurred to sell products (e.g., advertising, sales commissions). Like all expenses, it has a normal debit balance.
B. Sales Discounts – This is a contra-revenue account. It reduces total sales revenue when customers are given a discount for early payment. Since it is contra to revenue, it has a normal debit balance, not credit.
C. Sales Returns and Allowances – This is also a contra-revenue account. It is used to record returns or price adjustments for defective or unsatisfactory goods. Like sales discounts, it carries a normal debit balance.
D. Sales Revenue – This is a revenue account, which records the total income from selling goods or services before any deductions. Revenue accounts have a normal credit balance, meaning they increase with a credit entry.
Therefore, the correct answer is D. Sales Revenue, as it is the only account listed that naturally carries a credit balance. Understanding account types and their normal balances is foundational for preparing accurate financial statements and performing journal entries correctly in accounting.
