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:
“As blacks, we need not be afraid that encouraging moral development, a conscience and guilt will prevent social action. Black children without the ability to feel a normal amount of guilt will victimize their parents, relatives and community first. They are unlikely to be involved in social action to improve the black community. Their self-centered personalities will cause them to look out for themselves without concern for others, black or white.”
—James P. Comer (20th century)
“Success goes thus invariably with a certain plus or positive power: an ounce of power must balance an ounce of weight.”
—Ralph Waldo Emerson (1803–1882)