Explanation

Share premium has a credit balance, while the other accounts listed have debit balances. Understanding which accounts normally have debit or credit balances is fundamental to bookkeeping.

Share premium arises when a company issues shares at a price higher than their face value. The excess amount goes to the share premium account. This is part of shareholders’ equity and increases capital, which always has a credit balance.

Advertising and rents and rates are expense accounts. Expenses increase with debits and decrease with credits, so they normally have debit balances. Return inwards (sales returns) also has a debit balance because it reduces sales revenue.

The rule is: Assets and Expenses have debit balances. Liabilities, Capital, and Income have credit balances. Share premium is part of capital, so it has a credit balance.