Abnormal balance

Definition

Abnormal balance is an account balance that is opposite of the normal expected balance in accounting records. It often indicates an error or irregularity in transaction recording.

5 Must Know Facts For Your Next Test

1. Abnormal balances are commonly found in asset, liability, and equity accounts.
2. They can result from incorrect journal entries or misclassifications of transactions.
3. Detection of abnormal balances requires careful review of financial statements and ledgers.
4. Rectifying abnormal balances usually involves adjusting entries to correct errors.
5. An abnormal debit balance may appear in a liability account, while an abnormal credit balance may appear in an asset account.

Review Questions

• What could cause an abnormal balance to appear in an account?
• How would you correct an abnormal debit balance found in a liability account?
• Why is it important to identify and rectify abnormal balances?

Related terms

Normal Balance:

The expected debit or credit side that increases the value of a specific type of account.

Trial Balance:

A report that lists the balances of all general ledger accounts to ensure debits equal credits.

Adjusting Entries:

Journal entries made at the end of an accounting period to update account balances before preparing financial statements.