Concept explainers
Normal balance:
Normal balance refers to the excess of amount on one side, over the amount on the other side in an account. The excess amount of debit side over the credit side is shown as the normal debit balance. The excess amount of credit side over the debit side is shown as the normal credit balance.
Type of account | Normal balance |
Asset account | Debit balance |
Liability account | Credit balance |
Expense account | Debit balance |
Revenue account | Credit balance |
Dividend account | Debit balance |
Rules of Debit and Credit
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expense, dividends, and owner’s drawing accounts, and all decrease in liabilities, revenues and owner’s capital accounts.
- Credit, all increase in liabilities, revenues, and owner’s capital accounts, and all decrease in assets, expenses, and owner’s drawing account.
To determine: Whether each of the following account is likely to have (a) debit entries only, (b) credit entries only, or (c) both debit and credit entries, and also to indicate its normal balance.
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