Which of the following types of accounts have a normal debit balance?
A) Assets and Expenses
B) Liabilities and Dividends
C) Revenues and Liabilities
D) Owners’ Equity and Dividends
Assets and Expenses
Assets are properties that are utilized for generating income for a business and are purchased for a long period of time. These expenses are non-recurring in nature. Expenses are routine expenses and they are recurring in nature.
Definition of Debit Balance
In accounting, a debit balance refers to a general ledger account balance that is on the left side of the account. This is often illustrated by showing the amount on the left side of a T-account.
Examples of Accounts with Debit Balances
The following general ledger account classifications normally have debit balances:
Loss accounts (Loss on Sale of Plant Asset, Loss from Lawsuit, etc.)
Sole proprietor’s drawing account
The double-entry system needs that the general ledger account balances have the total of the debit balances equal to the total of the credit balances. This happens because every transaction must have the debit amounts equal to the credit amounts.
For instance, if a company borrows $10,000 from its local bank, the agency will debit its asset account Cash for $10,000 since the company’s cash balance is increasing. The same entry will credit its liability account Notes Payable for $10,000 since that account balance is also enhancing.