A credit balance in a liability account indicates that an error in recording has occurred.

Question

Quizplus · Accepted Answer

A credit balance in a liability account is actually normal and expected. It means that there has been a decrease in the liability or the company owes less money. This is why liabilities are typically shown with credit balances. Therefore, a credit balance in a liability account does not necessarily indicate an error in recording.

A Credit Balance in a Liability Account Indicates That an Error