Does Revenue Have A Normal Credit Balance

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.

Does revenue have a normal credit balance. Assets formal definition the properties used in the operation or investment activities of a. The normal balance of any account is the balance debit or credit which you would expect the account have and is governed by the accounting equation. Accounts with balances that are the opposite of the normal balance are called contra accounts. Liability revenue and withdrawal accounts all have normal credit balances.

In contrast accounts that normally have a debit balance include the asset loss contra liability owner s drawing dividend and expense accounts. This is the key to accounting and bookkeeping. Each of the accounts in a trial balance extracted from the bookkeeping ledgers will either show a debit or a credit balance. Therefore revenue is cash in so it s a dr to cash and a cr to the income line.

A business should have separate accounts for recording revenue and expenses. The revenue remaining after deducting all expenses or net income makes up the retained earnings part of shareholders equity on the balance sheet. Therefore income accounts have a normal credit balance. Have a normal balance amount that is normally a debit balance or a credit balance have a type and are classified as an asset liability equity revenue expense or draw are either a balance sheet or income statement account major types of accounts.

Hence contra revenue accounts will have debit balances. Expenses have the opposite effect from revenue on the capital account. You ve got to learn it to do decently. At the end of the accounting year the credit balances in the revenue accounts will be closed and transferred to the owner s capital account thereby increasing owner s equity.

It belongs on the credit portion of your balance sheet because it represents funds that have been credited to your bottom line increasing your net worth. The income statement shows revenue and expense activity. Let s illustrate revenue accounts by assuming your company performed a service and was immediately paid the full amount of 50 for the service. Income recorded as a credit on a balance sheet represents net income or the amount that you actually earned after subtracting expenses.

Your income is the money you earn. Revenue accounts have a normal credit balance and increase shareholders equity through retained earnings.