Normal balance

Definition

Normal balance is the side of a ledger account where increases are recorded. For assets, the normal balance is a debit, while for liabilities and equity, it is a credit.

5 Must Know Facts For Your Next Test

1. Assets have a normal debit balance.
2. Liabilities have a normal credit balance.
3. Equity accounts typically have a normal credit balance.
4. Revenue accounts generally have a normal credit balance.
5. Expenses usually have a normal debit balance.

Review Questions

• What is the normal balance for an asset account?
• In which side of the ledger would you find the normal balance for revenue?
• Why do expense accounts have a normal debit balance?

Related terms

Debit:

An entry on the left side of an account that increases assets and expenses or decreases liabilities and equity.

Credit:

An entry on the right side of an account that increases liabilities, equity, and revenue or decreases assets.

Ledger:

A book or collection of accounts in which account transactions are recorded.