Which account would typically carry a credit balance?

Which account would typically carry a credit balance?

• A. Asset
• B. Expense
• C. Revenue
• D. Prepaid Insurance

Answer: (C)

Revenue is the account that would typically carry a credit balance. In double-entry accounting, accounts have normal balances based on their type: assets and expenses normally show debit balances, while revenues, liabilities, and equity normally show credit balances. Revenue increases the owners’ equity, so it is increased with a credit. For example, when you earn revenue, you credit the revenue account (and debit cash or accounts receivable). Prepaid Insurance and other assets have debit normal balances, and expenses also carry debit balances, so they wouldn’t normally have a credit balance.

Revenue is the account that would typically carry a credit balance. In double-entry accounting, accounts have normal balances based on their type: assets and expenses normally show debit balances, while revenues, liabilities, and equity normally show credit balances. Revenue increases the owners’ equity, so it is increased with a credit. For example, when you earn revenue, you credit the revenue account (and debit cash or accounts receivable). Prepaid Insurance and other assets have debit normal balances, and expenses also carry debit balances, so they wouldn’t normally have a credit balance.