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:
“I don’t mind saying in advance that in my opinion jealousy is normal and healthy. Jealousy arises out of the fact that children love. If they have no capacity to love, then they don’t show jealousy.”
—D.W. Winnicott (20th century)
“Not in vain is Ireland pouring itself all over the earth. Divine Providence has a mission for her children to fulfill; though a mission unrecognized by political economists. There is ever a moral balance preserved in the universe, like the vibrations of the pendulum. The Irish, with their glowing hearts and reverent credulity, are needed in this cold age of intellect and skepticism.”
—Lydia M. Child (1802–1880)