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:
“Philosophically, incest asks a fundamental question of our shifting mores: not simply what is normal and what is deviant, but whether such a thing as deviance exists at all in human relationships if they seem satisfactory to those who share them.”
—Elizabeth Janeway (b. 1913)
“If when a businessman speaks of minority employment, or air pollution, or poverty, he speaks in the language of a certified public accountant analyzing a corporate balance sheet, who is to know that he understands the human problems behind the statistical ones? If the businessman would stop talking like a computer printout or a page from the corporate annual report, other people would stop thinking he had a cash register for a heart. It is as simple as that—but that isn’t simple.”
—Louis B. Lundborg (1906–1981)