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)
“Both the man of science and the man of art live always at the edge of mystery, surrounded by it. Both, as a measure of their creation, have always had to do with the harmonization of what is new with what is familiar, with the balance between novelty and synthesis, with the struggle to make partial order in total chaos.... This cannot be an easy life.”
—J. Robert Oppenheimer (1904–1967)