Question

Answer the following questions: Requirements 1. What type of normal balance does the Retained Earnings account have—debit or credit? 2. Which type of income statement account has the same type of balance as the Retained Earnings account? 3. Which type of income statement account has the opposite type of balance as the Retained Earnings account? 4. What do we call the difference between total debits and total credits on the income statement section of the worksheet?

Short answer

(1) Credit balance

(2) Revenue accounts

(3) Expense accounts

(4) Net income or Net loss

Step-by-step solution

Explanation on Retained Earnings Balance

Retained earnings are the accumulated profits of the previous years. It has the credit balance which gets increased with every credit.

Explanation on Revenue Accounts

Revenue accounts are the accounts related to revenues such as sales revenue, service revenue, rent revenue, interest revenue and so on. It has a credit balance as the normal balance, which gets increase by every credits.

Explanation on Expense Accounts

Expense accounts are the accounts related to expenses such as rent expense, interest expense, depreciation expense, salaries expense and so on. It has a debit balance as the normal balance, which gets increase by every debits.

Explanation on Net Income or Loss

In the income statement, when total revenues exceed total expenses than it result in net income, however in opposite situation it results in net loss.