Multiple Choice
Which of the following is an advantage of franchising to the franchisor?
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1. Introduction to Accounting
Types of Accounting
Struggling with Financial Accounting?
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Which of the following accounts would normally have a credit balance?
A
Cash
B
Accounts Payable
C
Prepaid Expenses
D
Inventory
Verified step by step guidance1
Understand the nature of account balances: In financial accounting, accounts are classified into assets, liabilities, equity, revenues, and expenses. Assets and expenses typically have debit balances, while liabilities, equity, and revenues usually have credit balances.
Analyze each account type: Cash, Prepaid Expenses, and Inventory are asset accounts, which normally have debit balances. Accounts Payable is a liability account, which typically has a credit balance.
Recall the accounting equation: Assets = Liabilities + Equity. This equation helps reinforce that liabilities (like Accounts Payable) are on the credit side of the equation.
Consider the normal balance rule: Assets increase with debits and decrease with credits, while liabilities increase with credits and decrease with debits. Since Accounts Payable is a liability, its normal balance is a credit.
Conclude based on the analysis: Among the given accounts, Accounts Payable is the account that would normally have a credit balance.
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