Which of the Following Is True Regarding Normal Balances of Accounts

question 201

Multiple Choice

Which of the following is true regarding normal balances of accounts?

• A) All accounts have a normal debit balance.
• B) All expense accounts have a normal negative balance.
• C) Accounts that have a normal debit balance will only have debit entries, never credit entries.
• D) The normal balance appears on the side of the account that also receives increase entries.

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Definitions:

Margin Of Safety

A financial ratio that measures the difference between actual sales and the break-even point, indicating the cushion a company has before incurring a loss.

Break-Even Sales

The point at which total revenues equal total costs, resulting in zero profit.

Operating Leverage

A financial metric that measures the degree to which a firm or project can increase operating income by increasing revenue.

Net Operating Income

A company's revenue minus its operating expenses, excluding taxes and interest, indicating the profitability of its core business activities.