Multiple Choice
Which statement is FALSE about capital gains tax on mutual fund earnings?
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1. Introduction to Accounting
Types of Accounting
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Which of the following types of accounts normally have a credit balance?
A
Dividend accounts
B
Liability accounts
C
Asset accounts
D
Expense accounts
Verified step by step guidance1
Understand the nature of account balances: In accounting, accounts are classified into categories such as assets, liabilities, equity, revenue, and expenses. Each type of account has a normal balance, which is either a debit or credit balance.
Review the normal balance for each account type: Asset accounts and expense accounts typically have a debit balance, while liability accounts, equity accounts, and revenue accounts typically have a credit balance.
Analyze the given options: Dividend accounts are part of equity but are treated as a reduction in retained earnings, so they usually have a debit balance. Asset accounts represent resources owned by the company and have a debit balance. Expense accounts represent costs incurred and also have a debit balance.
Focus on liability accounts: Liability accounts represent obligations or debts owed by the company. These accounts normally have a credit balance because they increase on the credit side and decrease on the debit side.
Conclude the correct answer: Based on the analysis, liability accounts are the type of accounts that normally have a credit balance.
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