State BPA Fundamental Accounting Practice Exam

A debit in a revenue account results in what effect?

1. Increase in revenue

2. Decrease in revenue

3. No change in revenue

4. Change to expense account

The correct answer is: Decrease in revenue

In accounting, revenue accounts typically have a credit balance, meaning that increases in revenue are recorded as credits, while decreases are recorded as debits. When a debit is applied to a revenue account, it indicates a reduction in the revenue that has been recognized. This could occur in various situations, such as issuing a refund or recognizing uncollectible accounts. Thus, a debit in a revenue account results in a decrease in revenue, which supports the correctness of the provided answer. Understanding this concept is essential in grasping the broader principles of double-entry accounting, where every transaction involves both a debit and a credit, impacting the financial statements accordingly.