Which of the following accounts has a normal credit balance?

Which of the following accounts has a normal credit balance?

a. Sales Returns and Allowances

b. Sales Discounts

c. Sales Revenue

d. Cost of Goods Sold

Answer: c. Sales Revenue

Sales Revenue has zero balance and goes to the credit side of the balance sheet. Normally, the mere revenue accounts assume credit balances by rising when sales occur and decreasing when there are returns or allowances. This treatment is also in line with the accounting equation (A=Pl-SE) whereby revenue increases the owner’s equity. In the case of a sale, the Sales Revenue account is on the right side which means that it is being credited. The credit balance shows the gross total of sales made by this business within the particular period it covers. Sales Revenue currently has a credit balance while the other options irate in Sales Returns and Allowances, Sales Discounts, and Cost of Goods Sold all have debit balances at their normal state. All these accounts have the effect of lowering the gross sales figure to arrive at the net sales figure. It is necessary to know the accounts balance as it helps in recording transactions and preparation of various financial statements.