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Normal Balances

We went through a lot of accounts in Assets, Liabilities, & Equity. Each of those accounts have what's called a normal balance.

The normal balance of an account dictates whether a debit or credit makes the account increase or decrease.

So... how does the normal balance dictate whether a debit / credit makes the account increase / decrease?

If an account has a normal debit balance, then a debit will make it increase & a credit will make it decrease.

If an account has a normal credit balance, then a debit will make it decrease & a credit will make it increase.

So... how can you tell whether a given account has a debit or credit normal balance?

Lucky for us, it's decently simple, and can be broken down with the following table!

Account TypeNormal BalanceIncreases with a...Decreases with a...
AssetDebitDebitCredit
LiabilityCreditCreditDebit
EquityCreditCreditDebit

Notice how the left side of the accounting equation...

Assets = Liabilities + Equity

...has a normal debit balance...

Account TypeNormal BalanceIncreases with a...Decreases with a...
AssetDebitDebitCredit
LiabilityCreditCreditDebit
EquityCreditCreditDebit

...and the right side of the accounting equation...

Assets = Liabilities + Equity

...has a normal credit balance.

Account TypeNormal BalanceIncreases with a...Decreases with a...
AssetDebitDebitCredit
LiabilityCreditCreditDebit
EquityCreditCreditDebit