Do Revenue Accounts Have A Credit Balance

We will debit the revenue accounts and credit the income summary account.

Do revenue accounts have a credit balance. To make them zero we want to decrease the balance or do the opposite. A normal balance is the expectation that a particular type of account will have either a debit or a credit balance based on its classification within the chart of accounts it is possible for an account expected to have a normal balance as a debit to actually have a credit balance and vice versa but these situations should be in the minority. The income statement shows revenue and expense activity. Therefore revenue is cash in so it s a dr to cash and a cr to the income line.

Money coming into your account. Therefore income accounts have a normal credit balance. Unlike other accounts revenue accounts are rarely debited because revenues or income are usually only generated. Accounts with balances that are the opposite of the normal balance are called contra accounts.

From the table above it can be seen that assets expenses and dividends normally have a debit balance whereas liabilities capital and revenue normally have a credit balance. We see from the adjusted trial balance that our revenue accounts have a credit balance. This is the key to accounting and bookkeeping. Revenue accounts have a normal credit balance and increase shareholders equity through retained earnings.

If for example you have a debit of 1 000 from the purchase of a new computer you would then create an equal credit for the asset of the computer. The accounts that have a normal credit balance include contra asset liability gain revenue owner s equity and stockholders equity accounts. This means that a credit in the revenue t account increases the account balance. These two entries must balance each other out.

Asset accounts equity revenue. In contrast accounts that normally have a debit balance include the asset loss contra liability owner s drawing dividend and expense accounts. You ve got to learn it to do decently. By identifying the type of account asset liability etc and establishing which side of the accounting equation it is on left or right it is possible to determine.

Let s illustrate revenue accounts by assuming your company performed a service and was immediately paid the full amount of 50 for the service. As shown in the expanded accounting equation revenues increase equity. Close means to make the balance zero. The revenue account is an equity account with a credit balance.