What type of balance do Purchase Discounts typically have?

Purchase Discounts normally represent a reduction in the cost of purchases when early payment is made. This type of account is typically viewed as a contra-expense account, which generally carries a credit balance. When a company receives a discount for early payment, it decreases the total cost of the purchases recognized in the financial records.

In accounting terms, when a discount is taken, it is subtracted from the purchases, thereby reducing the overall expense reported in the income statement. Therefore, the correct understanding would be that Purchase Discounts should reflect a credit balance to effectively reduce the total amount of purchases reported.

A debit balance would suggest an increase in purchase costs rather than a discount, which contradicts the purpose of recording purchase discounts. The other options, such as null balance or accrued balance, do not align with how Purchase Discounts are categorized and handled in accounting practices. A null balance implies that the account carries no value, and accrued balances typically refer to liabilities relating to expenses that have been incurred but not yet paid, which does not apply in this case.