Finance:Normal balance
From HandWiki
Revision as of 07:39, 5 August 2021 by imported>PolicyEnforcerIA (attribution)
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 equity
The 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
This article does not cite any external source. HandWiki requires at least one external source. See citing external sources. (2021) (Learn how and when to remove this template message) |
Original source: https://en.wikipedia.org/wiki/Normal balance.
Read more |