Multiple Choice
In a journal entry, when a corporation issues common stock for cash, how is the Common Stock account typically recorded?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
In financial accounting, does the Common Stock account have a normal debit balance?
A
Yes; Common Stock is an asset account with a normal debit balance.
B
No; Common Stock is an equity account with a normal credit balance.
C
Yes; Common Stock is a contra-equity account with a normal debit balance.
D
No; Common Stock is a liability account with a normal debit balance.
Verified step by step guidance1
Step 1: Understand the classification of the Common Stock account. Common Stock represents ownership equity in a corporation, so it is classified as an equity account.
Step 2: Recall the normal balance rules for different types of accounts: Asset accounts normally have debit balances, Liability and Equity accounts normally have credit balances.
Step 3: Since Common Stock is an equity account, its normal balance is a credit balance, not a debit balance.
Step 4: Recognize that Common Stock is not an asset, liability, or contra-equity account, so options suggesting those classifications are incorrect.
Step 5: Conclude that the correct statement is: 'No; Common Stock is an equity account with a normal credit balance.'
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