Normal balance is the accounting classification of an account. It is part of double-entry book-keeping technique.
An account has either credit (Abbrev. CR) or debit (Abbrev. DR) normal balance. To increase the value of an account with normal balance of credit, one would credit the account. To increase the value of an account with normal balance of debit, one would likewise debit the account.
The fundamental accounting equation is the following:
Asset = Liability + Owner's equityThe account on left side of this equation has a normal balance of debit. The accounts on right side of this equation have a normal balance of credit. The normal balance of all other accounts are derived from their relationship with these three accounts.
Normal balance of common accounts:
- Asset: Debit
- Liability: Credit
- Owner's Equity: Credit
- Revenue: Credit
- Expense: Debit
- Retained Earnings: Credit
- Dividend: Debit
Famous quotes containing the words normal and/or balance:
“The basic thing nobody asks is why do people take drugs of any sort?... Why do we have these accessories to normal living to live? I mean, is there something wrong with society that’s making us so pressurized, that we cannot live without guarding ourselves against it?”
—John Lennon (1940–1980)
“Finding the perfect balance is getting harder and harder. We need to teach our children to be cautious without imparting fear, to learn right from wrong without being judgmental, to be assertive but not pushy, to stick to routines without sacrificing spontaneity, and to be determined but not stubborn.”
—Fred G. Gosman (20th century)