Concept explainers
(a)
Account:
An account refers to a financial record in the general ledger, where the increase or decrease in the values of the assets, liabilities, stockholder’s equity, revenues or expenditures of the business, pertaining to a particular period are recorded. Some of the accounts are assets, liabilities, and stockholder’s equity.
Assets:
Assets are the resources, owned by the company, that are used for the generation of income in the future. Assets are classified under four major heads which are as follows:
- Current assets
- Long-term investments
- Property, Plant and Equipment
- Intangible assets
Some of the examples of assets are equipment, accounts receivable, supplies, and cash.
Liabilities:
Liabilities refer to the financial debts or obligations, which the company is owed to its creditors. The creditors have the claims over the assets of the company. Some of the examples of the liabilities are accounts payable, unearned revenue, and income tax payable.
Stockholder’s equity represents the capital contributed by the shareholders to its business and the revenues generated for the business. Stockholders’ equity is sometimes referred to as the net worth of the shareholders or stockholders. The two parts of stockholders’ equity are common stock and retained earnings.
Normal debit and credit balance:
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 |
Assets account | Debit balance |
Liabilities account | Credit balance |
Expense account | Debit balance |
Revenue account | Credit balance |
Dividends account | Debit balance |
Table (1)
To indicate: whethereach of the following account is an asset, a liability, or a stockholder’s equity account and whether it would have a normal debit or credit balance.
(b)
To indicate: whethereach of the following account is an asset, a liability, or a stockholder’s equity account and whether it would have a normal debit or credit balance.
(c)
To indicate: whethereach of the following account is an asset, a liability, or a stockholder’s equity account and whether it would have a normal debit or credit balance.
(d)
To indicate: whethereach of the following account is an asset, a liability, or a stockholder’s equity account and whether it would have a normal debit or credit balance.
(e)
To indicate: whethereach of the following account is an asset, a liability, or a stockholder’s equity account and whether it would have a normal debit or credit balance.
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Financial Accounting
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- A credit is used to increase which of the following accounts? a. Dividends. b. Insurance Expense. c. Cash. d. Service Revenue.arrow_forwardFor each ofthe following accounts, identify whether that item is an asset, liability, or equity account.a. Bonds payableb. Equipmentc. Accounts payabled. Salaries payablee. Common stockf. Retained earningsg. Cashh. Accounts receivablei. Sales revenuej. Inventoryarrow_forwardFor each account, identify whether the normal balance is a debit or credit a.Notes Payable b.Dividends c.Service Revenue How do i figure this out?arrow_forward
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