The classification and normal balance of the accounts payable account are a. liability, credit balance b. owner's equity, credit balance c. asset, credit balance d. revenue, credit balance

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Business

Rebekah

23 February, 11:26

The classification and normal balance of the accounts payable account are a. liability, credit balance b. owner's equity, credit balance c. asset, credit balance d. revenue, credit balance

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Mario Monroe · Answer 1

Optoin A Liability, Credit balance

Explanation:

The reason is that the payables which are the obligation of the organization are liabilities and company liabilities are always credit in nature.

This can also be explained from the following formula:

Assets = Equity + Liabilities

As we know that equity is equal to:

Equity = (Op. Equity + Revenue - Expenses - Dividends)

And

Liabilities = (Current Liabilities + Long term liabilities)

By putting values we have:

Assets = (Op. Equity + Revenue - Expenses - Dividends) + (Current Liabilities + Long term liabilities)

Assets + Expenses + Dividends = Op. Equity + Revenue + (Current Liabilities + Long term liabilities)

So the amount that is in the left side of the equation is debit and the amount on the right side of the equation is credit in nature. Remeber that credit and debit are equal in amount which is the reason why this equation holds true.