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

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Study for the AAT Level 2 Introduction to Bookkeeping Test. Use flashcards and multiple choice questions with hints and explanations. Prepare effectively for your exam!

Multiple Choice

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

Explanation:
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.

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