Revenues Have A Normal Debit Credit Balance And Increase Decrease Retained Earnings

Retained earnings appears in the stockholders equity section of the balance sheet.

Revenues have a normal debit credit balance and increase decrease retained earnings. Contributed capital capital stock and retained earnings both of which have a normal credit balance. Accounts with balances that are the opposite of the normal balance are called contra accounts. Credit causes the decrease in assets only because assets has debit balance as a normal balance while all other items has credit balance and credit causes the increase in them. When their values increase those increases appear on the side that is normal to that account while decreases appear on the opposite side.

Identify whether a debit or credit results in the indicated change for each of the following accounts. Let s illustrate revenue accounts by assuming your company performed a service and was immediately paid the full amount of 50 for the service. The side that increases debit or credit is referred to as an account s normal balance. Retained earnings normal balance.

Retained earnings equals your company s net. Stockholders equity has two primary components. How to decrease retained earnings with debit or credit. Here is another summary chart of each account type and the normal balances.

A to increase land b to decrease cash c to increase fees earned revenues d to increase office expense e to decrease unearned revenue f to decrease prepaid rent g to increase notes payable h to decrease accounts receivable. All accounts including retained earnings possess a normal positive balance that displays as either a debit or a credit. Revenues have normal credit balances because they increase retained earnings which is on the credit side of the accounting equation therefore revenues are always increased on the credit side of the t account and decreased on the debit side. Debit expanded basic accounting equation assets liabilities stockholder s equity common stock retained earnings revenues expenses dividends.

Hence contra revenue accounts will have debit balances. Remember any account can have both debits and credits. Retained earnings is reported on both the balance sheet and the statement of retained earnings. Debit and credit refer to the left and right sides of the accounting ledger.

Expenses decrease retained earnings and decreases in retained earnings are recorded on the left side.