State BPA Fundamental Accounting Practice Exam

True or False: Assets normally have a credit balance.

1. True

2. False

3. Sometimes true

4. Always false

The correct answer is: False

Assets typically have a debit balance, which means they are recorded on the left side of an accounting ledger. This is a fundamental principle in accounting that stems from the double-entry system, where every transaction affects at least two accounts. When assets increase, they are debited, and when they decrease, they are credited. The reason assets usually carry a debit balance is that they represent resources owned by the business that provide future economic benefits. Conversely, liabilities and equity accounts typically carry a credit balance because they represent claims against the assets of the business. Therefore, stating that assets normally have a credit balance is inaccurate, as it contradicts the established rules of accounting. This reinforces the understanding that debts and equity are recorded differently from assets in financial statements.