Debit Balance Accounts in Commerce

Debit and credit are two fundamental concepts in accounting. Debit refers to the left side of an account, while credit refers to the right side. In accounting, debit balance means the total of debits exceeds the total of credits in an account.

Out of the given options, the account with a debit balance is:

(B) Bank loan

Bank loan is a liability account and represents the money borrowed from a bank or financial institution. It is a common source of long-term financing for businesses. When a company borrows money from a bank, it records the loan as a liability on the balance sheet.

A bank loan has a debit balance because:

- When the loan is taken, the cash (an asset) received from the bank increases the cash account, which is a debit account.
- At the same time, the bank loan liability account increases, which is a credit account.
- As long as the loan remains unpaid, the liability account balance will remain on the credit side, and the cash account balance will remain on the debit side.
- Interest and principal payments on the loan reduce the liability account (credit) and the cash account (debit) simultaneously.

Other options explained:

(A) Prepaid insurance premium - Prepaid insurance premium is a current asset account that represents the insurance premium paid in advance for future coverage. It has a credit balance because cash is paid upfront, and the benefit is received later.

(C) Income received in advance - Income received in advance is a liability account that represents the money received in advance for goods or services that are not yet provided. It has a credit balance because the company owes the product or service to the customer.

(D) Creditors for goods - Creditors for goods is a liability account that represents the money owed to suppliers for goods purchased on credit. It has a credit balance because the company owes money to the supplier.

Option (A) - Prepaid Insurance Premium
This is because it is a prepaid expense which is an asset for the company. Assets have debit balances.

The other 3 options are liabilities and hence have credit balances.