State BPA Fundamental Accounting Practice Exam

What balance would you expect from an asset account?

1. Credit balance

2. Debit balance

3. Both credit and debit

4. No balance

The correct answer is: Debit balance

In accounting, asset accounts typically reflect the resources owned by a business that provide future economic benefits. According to the principles of double-entry bookkeeping, asset accounts generally carry a debit balance. This means that when an asset is increased, it is recorded as a debit, and when an asset is decreased, it's recorded as a credit. For example, if a company purchases equipment, the equipment account is debited, increasing the balance in that asset account. Conversely, if the company sells that equipment, the asset account is credited to decrease its balance. Having a debit balance signifies that the business has resources available (assets) that are greater than its obligations (liabilities). This is a fundamental aspect of the accounting equation: Assets = Liabilities + Equity. By maintaining a debit balance in asset accounts, it ensures that the left side of this equation (assets) reflects the value owned by the business. This understanding is crucial for accurately interpreting financial statements and managing a business's financial health. Thus, it is expected for an asset account to have a debit balance.