Does the Common Stock account typically have a normal credit balance in the accounting equation?

• A. No, because Common Stock is an asset account and asset accounts normally have debit balances.
• B. Yes, because Common Stock is an equity account and equity accounts normally have credit balances.
• C. No, because Common Stock is a contra-equity account and contra accounts normally have debit balances.
• D. Yes, because Common Stock is an expense account and expense accounts normally have credit balances.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the classification of the Common Stock account. Common Stock represents ownership equity in a company, so it is classified as an equity account.
2. Step 2: Recall the normal balance rules for different types of accounts. Asset accounts normally have debit balances, liability and equity accounts normally have credit balances, and expense accounts normally have debit balances.
3. Step 3: Recognize that Common Stock is not an asset account, so it does not have a normal debit balance.
4. Step 4: Understand that Common Stock is not a contra-equity account. Contra-equity accounts reduce equity and have debit balances, but Common Stock increases equity and thus has a credit balance.
5. Step 5: Conclude that since Common Stock is an equity account, it typically has a normal credit balance, consistent with the rules of accounting for equity accounts.