Answered: state the differences between unearned…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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state the differences between unearned revenue and accounts payable? both accounts are liabilities therefore what is the normal balance of liability and does it matter?

Expert Solution

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Definition:

Normal balance refers to the excess of the amount on one side, over the amount on the other side in an account. The excess amount of debit side over the credit side is shown as the normal debit balance. The excess amount of credit side over the debit side is shown as the normal credit balance.

Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses, and dividends, all decrease in liabilities, revenues, and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

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