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:
“Our normal waking consciousness, rational consciousness as we call it, is but one special type of consciousness, whilst all about it, parted from it by the filmiest of screens, there lie potential forms of consciousness entirely different.”
—William James (1842–1910)
“We must introduce a new balance in the relationship between the individual and the government—a balance that favors greater individual freedom and self-reliance.”
—Gerald R. Ford (b. 1913)