What characterizes the normal balance for liability, equity, and revenue accounts?

Liability, equity, and revenue accounts are characterized by having credit balances as a normal practice in accounting. This stems from the fundamental principles of double-entry bookkeeping, where each transaction affects at least two accounts.

Liabilities represent obligations or debts that a company owes to external parties, and they are recorded as credits because they increase the credit side of the accounting equation. Similarly, equity accounts reflect the ownership interest in the company, representing funds contributed by owners and retained earnings, which also have a credit balance by nature. Revenue accounts, which record income generated from business operations, are credited when the company earns revenue, increasing the overall equity and reflecting growth in financial standing.

The fundamental rule underlying these accounts is that when you credit a liability, equity, or revenue account, you increase its balance, solidifying the concept that these accounts generally hold credit balances in a well-structured accounting system.