What is the normal balance?

More about double-entry accounting and an account's normal balance.

The Normal Balance or normal way that an asset or expenditure is increased is with a debit (positive amount). The Normal Balance or normal way that a liability, equity, or revenue is increased is with a credit (negative amount).

To effectively use double-entry accounting, it is critical that you understand how debits and credits work. At first glance, the meaning of these terms seems obvious. However, in double-entry accounting, these terms are used differently than you may be used to.

Sometimes a debit will increase an account and sometimes it will decrease an account. Likewise, a credit may increase an account or decrease an account. It all depends on the normal balance of the account.

All accounts either have a credit (CR) or debit (DR) normal balance. If you record a credit in an account with a normal balance or CR, then the account is increased. If you record a debit in the same account, it decreases it.

However, if you're dealing with a DR account, a debit transaction will actually increase it and a credit transaction will decreases it.

Commonly accepted normal balance for Debit (DR) accounts

Asset
Expense

Commonly accepted normal balance for Credit (CR) accounts

Liability
Equity
Revenue