Knowing the Normal Balances of Accounts Would Help an Accountant

question 147

Multiple Choice

Knowing the normal balances of accounts would help an accountant spot which of the following as a recording error?

• A) A debit balance in the owner's drawing account
• B) A debit balance in an asset account
• C) A credit balance in a liabilities account
• D) A debit balance in a revenue account

---

Definitions:

Initial Investment

The amount of money used to start a project, purchase an asset, or initiate operations.

Cash Inflows

Money or funds entering a business from various sources like sales, investments, or financing.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of shareholder wealth maximization, such as purchasing equipment or acquiring another business.

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for the time value of money.