Which of the following statements is incorrect?
a. The normal balance of accounts receivable is a debit.
b. The normal balance of an expense account is a credit.
c. The normal balance of the owner's capital account is a credit.
d. The normal balance of unearned revenues is a credit.
e. The normal balance of owner's withdrawals is a debit.
b. The normal balance of an expense account is a credit.
The incorrect statement among the options provided is:
b. The normal balance of an expense account is a credit.
The normal balance of an expense account is a debit, not a credit. Expenses represent costs or expenditures incurred by a business entity and are typically recorded with debit entries to the expense accounts.
To determine which statement is incorrect, we need to understand the normal balances of the given accounts.
In accounting, each account has a normal balance, which represents the side (debit or credit) that increases the account balance. Here's how to determine the normal balance of each account:
a. Accounts Receivable: Represents the amounts owed by customers. The normal balance is a debit because an increase in accounts receivable is recorded on the debit side.
b. Expense Account: Represents the costs incurred to generate revenue. The normal balance is a debit because expenses are generally recorded as debits, increasing the expense account.
c. Owner's Capital Account: Represents the owner's investment in the business. The normal balance is a credit because an increase in the owner's capital is recorded on the credit side.
d. Unearned Revenues: Represents the liability incurred when a customer pays in advance for goods or services. The company owes the customer the goods or services. The normal balance is a liability, which is a credit because an increase in unearned revenue is recorded on the credit side.
e. Owner's Withdrawals: Represents the owner's withdrawals of assets from the business. The normal balance is a debit because the owner's withdrawals decrease the owner's capital.
Therefore, the statement that is incorrect is:
b. The normal balance of an expense account is a credit.
The normal balance of an expense account is a debit, not a credit.