Accounting Fundamentals Certification (AFC) 2025 – 400 Free Practice Questions to Pass the Exam

The reason that Equipment typically has a debit balance stems from its classification in accounting. Equipment is considered a long-term asset, and assets generally increase with debits. When equipment is purchased, the entry is made as a debit to the Equipment account, reflecting an increase in the company’s assets.

In contrast, the other accounts listed often maintain credit balances. For example, Notes Payable and Accounts Payable are liability accounts; liabilities generally have a credit balance since they represent obligations owed by the business. When these liabilities increase, they are recorded as credits. Cash, while it is indeed an asset, is more frequently referenced in terms of how its balance can fluctuate, but debit balances are mostly considered when looking at increases to cash rather than the category of accounts typical to assets like Equipment. Therefore, Equipment, being a capital asset, is the clear choice for an account that generally holds a debit balance.