For each of the following accounts, indicate the effect of a debit or a credit on the account and the normal balance. Debit Effect Credit Effect Normal Balance a. Accounts Payable. select between increase and decrease select between increase and decrease select between credit and debit b. Advertising Expense. select between increase and decrease select between increase and decrease select between credit and debit c. Service Revenue. select between increase and decrease select between increase and decrease select between credit and debit d. Accounts Receivable. select between increase and decrease select between increase and decrease select between credit and debit e. Retained Earnings. select between increase and decrease select between increase and decrease select between credit and debit f. Dividends.

Assets are a company's resources—things the company owns. Examples of assets include cash, accounts receivable, inventory, prepaid insurance, investments, land, buildings, equipment, and goodwill. From the accounting equation, we see that the amount of assets must equal the combined amount of liabilities plus owner's (or stockholders') equity.

Liabilities are a company's obligations—amounts the company owes. Examples of liabilities include notes or loans payable, accounts payable, salaries and wages payable, interest payable, and income taxes payable (if the company is a regular corporation). Liabilities can be viewed in two ways:

(1) as claims by creditors against the company's assets, and

(2) a source—along with owner or stockholder equity—of the company's assets.

Owner's equity or stockholders' equity is the amount left over after liabilities are deducted from assets:

Assets - Liabilities = Owner's (or Stockholders') Equity.

Owner's or stockholders' equity also reports the amounts invested into the company by the owners plus the cumulative net income of the company that has not been withdrawn or distributed to the owners.