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Treadle: account balances that are not normal; asset expense

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1. Which account would be most likely to have an account balance that is not normal?

2. A company incurs a cost for a part that is needed to repair a piece of equipment. Is the cost an asset or an expense? Explain.

3. If a company's cash flows for expenses temporarily exceed its cash flows from revenues, how might it make up the difference so that it can maintain liquidity?

4. How would the asset accounts in the chart (provided) of accounts for Treadle Website Design differ if it were a retail company that sold advertising products instead of being a service company? 1. Which account would be most likely to have an account balance that is not normal?

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1. Which account would be most likely to have an account balance that is not normal?

The definition of a normal balance is defined by the accounting equation of assets = liabilities + equity. In the equation, assets have normal debit balance, as do expense accounts. Liabilities and equity have normal credit balances as well as revenue accounts.

Accounts that are not normal would be the opposite of the expected balance as defined above. There are three common exceptions to normal balances: the allowance for doubtful accounts is a contra account to accounts receivable, accumulated depreciation is a reduction of fixed assets, and dividends are a reduction of equity. All three have reverse balances from what is considered 'normal' for the type of account.

2. A company incurs a cost for a part that is needed to ...

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The 557 word response carefully explains the concepts and provides understandable examples.

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