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:
“Love brings to light the lofty and hidden characteristics of the lover—what is rare and exceptional in him: to that extent it can easily be deceptive with respect to what is normal in him.”
—Friedrich Nietzsche (1844–1900)
“Forget dating. Forget striking a balance between work and family. Most single parents, whether they are divorced, widowed, or single by choice, report that discipline is by far the toughest issue.”
—Jean Callahan (20th century)