Which statement correctly describes the combined balances of Purchases and Sales Revenue accounts?

Which statement correctly describes the combined balances of Purchases and Sales Revenue accounts?

• A. Purchases has a Debit balance; Sales Revenue has a Credit balance.
• B. Purchases has a Credit balance; Sales Revenue has a Debit balance.
• C. Both have Credit balances.
• D. Both have Debit balances.

Answer: (A)

In double-entry bookkeeping, expenses (like Purchases) normally increase with a debit, giving them a debit balance, while revenues (like Sales Revenue) normally increase with a credit, giving them a credit balance. Since Purchases represents an expense, its normal balance is debit. Since Sales Revenue represents income, its normal balance is credit. Therefore, the combined balances are: Purchases has a Debit balance and Sales Revenue has a Credit balance. The other possibilities would contradict how debits and credits typically affect these types of accounts.

In double-entry bookkeeping, expenses (like Purchases) normally increase with a debit, giving them a debit balance, while revenues (like Sales Revenue) normally increase with a credit, giving them a credit balance. Since Purchases represents an expense, its normal balance is debit. Since Sales Revenue represents income, its normal balance is credit. Therefore, the combined balances are: Purchases has a Debit balance and Sales Revenue has a Credit balance. The other possibilities would contradict how debits and credits typically affect these types of accounts.