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 shouldn’t say I’m looking forward to leading a normal life, because I don’t know what normal is. This has been normal for me.”
—Martina Navratilova (b. 1956)
“Mental health depends upon the maintenance of a balance within the personality between the basic human urges and egocentric wishes on the one hand and the demands of conscience and society on the other hand.”
—Selma H. Fraiberg (20th century)