State BPA Fundamental Accounting Practice Exam

Which of the following types of accounts typically has a credit balance?

1. Expense accounts

2. Revenue accounts

3. Asset accounts

4. Liability accounts

The correct answer is: Revenue accounts

Revenue accounts typically have a credit balance because they represent income earned by a business from its normal operations, such as sales of goods or services. In accounting, the double-entry system records the effects of transactions in at least two accounts. When a business earns revenue, it increases the revenue account, which is recorded with a credit entry. This reflects that the business has generated income, which increases the owners' equity in the company. In contrast, expense accounts, asset accounts, and liability accounts generally do not have a credit balance. Expense accounts show the costs incurred in the operation of the business and are recorded with a debit entry, resulting in a normal debit balance. Asset accounts represent resources owned by the business that also maintain a normal debit balance. Lastly, liability accounts, which track obligations or debts owed, generally have a credit balance, but they do not qualify as revenue accounts. Thus, classifying revenue accounts as having a credit balance distinguishes them from other types of accounts in the accounting framework.