Future Business Leaders of America (FBLA) Accounting Practice Test

The side of an account that is increased relates to which accounting term?

1. Normal Balance

2. Chart of Accounts

3. Debit

4. Credit

The correct answer is: Normal Balance

The term that refers to the side of an account that is increased is known as the "Normal Balance." Each type of account in accounting has a normal balance, which indicates whether it is increased by debits or credits. For example, asset accounts typically have a normal balance on the debit side, meaning they increase with debits. In contrast, liability and equity accounts have a normal balance on the credit side, indicating they increase with credits. Understanding the concept of normal balance helps in double-entry bookkeeping, where every transaction is recorded in two accounts to maintain the accounting equation. This foundational principle assures that the accounting records remain balanced, as the total debits must always equal total credits across the ledger. Recognizing the normal balance for different account types is essential for accurate financial reporting and analysis.