Multiple Choice
In journal entries, which statement correctly describes how Common Stock is recorded when a corporation issues shares for cash?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following account types normally carries a credit balance?
A
Accounts payable
B
Accounts receivable
C
Prepaid insurance
D
Supplies
Verified step by step guidance1
Understand the nature of each account type: Accounts payable, Accounts receivable, Prepaid insurance, and Supplies.
Recall that accounts with a credit balance typically represent liabilities, equity, or revenue accounts, while accounts with a debit balance usually represent assets or expenses.
Identify that Accounts payable is a liability account, which normally carries a credit balance because it represents amounts the company owes to creditors.
Recognize that Accounts receivable, Prepaid insurance, and Supplies are asset accounts, which normally carry debit balances as they represent resources owned by the company.
Conclude that among the options, Accounts payable is the account type that normally carries a credit balance.
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