Question

For each of the following accounts, indicate the effect of a debit or a credit on the account and the normal balance.

(a) Accounts Payable
(b) Advertising Expense
(c) Service Revenue
(d) Accounts Receivable
(e) Retained Earnings
(f) Dividends

Answer 1

Answer:

a. Accounts Payable                                    

Effect of a debit - Decrease

Effect of a credit - Increase

Normal balance - Credit

b. Advertising Expense

Effect of a debit - Increase

Effect of a credit - Decrease

Normal balance - Debit

c.  Service Revenue

Effect of a debit - Decrease

Effect of a credit - Increase

Normal balance - Credit

d. Accounts Receivable

Effect of a debit - Increase

Effect of a credit - Decrease

Normal balance - Debit

e. Retained Earnings

Effect of a debit - Decrease

Effect of a credit - Increase

Normal balance - Credit

f. Dividends

Effect of a debit - Increase

Effect of a credit - Decrease

Normal balance - Debit

Explanation:

Debit balances for example expenses and assets such as cash, accounts receivable, inventory etc. are increased by debits and decreased by credits.

Credit balances for example revenue, share capital, retained earnings, liabilities such as accounts payable, debt etc. are increased by credits and decreased by debits.