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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Normal balances of accounts

Identify each of the following accounts of Kaiser Services Co. as asset, liability, owner's equity, revenue, or expense, and state in each case whether the normal balance is a debit or a credit:

  1. a. Accounts Payable
  2. b. Accounts Receivable
  3. c. Bobby Lund, Capital
  4. d. Bobby Lund, Drawing
  5. e. Cash
  6. f. Fees Earned
  7. g. Office Equipment
  8. h. Rent Expense
  9. i. Supplies
  10. j. Wages Expense

To determine

Normal balance:

Normal balance refers to the excess of amount on one side, over the amount on the other side in an account. The excess amount of debit side over the credit side is shown as the normal debit balance. The excess amount of credit side over the debit side is shown as the normal credit balance.

Type of account Normal balance
Asset account Debit balance
Liability account Credit balance
Expense account Debit balance
Revenue account Credit balance
Dividend account Debit balance

Table (1)

Rules of debit and credit:

“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.

Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.

To identify: The types of each account (asset, liability, owner’s equity, revenue or expense) and their normal balance.

Explanation
  • Accounts payable is a liability account, and the liability account shows a normal balance of credit.
  • Accounts receivable, cash, office equipment and supplies are the asset accounts. The asset account shows a normal balance of debit.
  • Capital account and drawings account are the component of owner’s equity...

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