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!

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

Assets = Liabilities + Equity

...has a normal debit balance...

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

Assets = Liabilities + Equity

...has a normal credit balance.