Future Business Leaders of America (FBLA) Accounting Practice Test

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Prepare for the FBLA Accounting Test with practice quizzes and comprehensive questions. Each question is designed to help deepen your understanding and enhance your readiness for the exam. Are you ready to excel?

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What does the term 'Normal Balance' refer to in accounting?

The side of the account that is increased
The sum of debits and credits
The total assets of a company
The final balance after adjustments

The correct answer is: The side of the account that is increased

The term 'Normal Balance' in accounting refers to the side of the account that is increased. In accounting, every account has a normal balance which indicates whether it is typically increased by debits or credits. For example, asset and expense accounts usually have a normal debit balance, whereas liability, revenue, and equity accounts typically have a normal credit balance. This concept is fundamental to the double-entry accounting system, where every financial transaction affects at least two accounts and maintains the accounting equation's balance. Understanding what constitutes the normal balance for different types of accounts helps accountants effectively record transactions and maintain accurate financial statements.