CFP Certified Financial Planner Test Prep

Answer - B - Common stock has a credit balance and is a liability to the corporation.

Key Takeaway: Common stock is issued in exchange for part of the ownership of the corporation. The account is increased by credits and decreased by debits. It is considered a liability. The stock represents a share of equity that would need to be returned or refunded to a shareholder, almost like an accounts payable for equity. On the other hand, that share of stock represents an asset for the shareholder.