What is the normal balance for liabilities?

What is the normal balance for liabilities?

• A. Debit
• B. Credit
• C. Neither
• D. Both

Answer: (B)

Liabilities are obligations the company owes, and in double-entry accounting increases are recorded on the credit side. That means the normal balance for liabilities is a credit. For example, accounts like accounts payable or notes payable increase with credits. When you incur a liability, you credit the liability account (often paired with a debit to an asset or expense). When you pay off a liability, you debit the liability (and credit cash). Since debits decrease liabilities and credits increase them, the expected or normal balance that liabilities tend to have is a credit.

Liabilities are obligations the company owes, and in double-entry accounting increases are recorded on the credit side. That means the normal balance for liabilities is a credit. For example, accounts like accounts payable or notes payable increase with credits. When you incur a liability, you credit the liability account (often paired with a debit to an asset or expense). When you pay off a liability, you debit the liability (and credit cash). Since debits decrease liabilities and credits increase them, the expected or normal balance that liabilities tend to have is a credit.