Normal Balance: Definition and Meaning

There are two types of balance, and it’s important to understand the difference between the two. The first is the normal balance, which is the concept of how much money goes into savings and the other into debt. The second is the abnormal balance, which is the concept of how much savings you need, or debt you need to have.

In this age of the extreme, the normal balance between our financial and non-financial lives is something that is often forgotten. When we hear of someone going from rags to riches, we think it is an extreme condition, but the truth is that most people aren’t extreme enough to become rich. A balance between financial and non-financial goals is what defines a normal, healthy individual.

Home » Accounting Blog » Accounting Concepts: Normal Balance

Feb 26, 2021
Accounting Blog by audit site

The meaning of normal balance in accounting is something one would learn at the very beginning of their bookkeeping and accounting studies. Let’s find out what it is all about and what role it plays in bookkeeping records.

Definition

Normal balance is defined as the increase side of a bookkeeping account. Depending on its classification, an account is increased either on the debit or credit side. As you might already know, credit is how much is recorded on the right side of a T-account, while debit is how much is recorded on the opposite side.

Accordingly, Assets will normally have a debit balance and Liabilities – credit. When it comes to the Owner’s Equity, things can get a little confusing because it has a number of components. Just like Liabilities, the Owner’s Equity normally has a credit balance. So, anything that increases the Owner’s Equity will also have a credit normal balance. At the same time, anything that reduces this account will have normal debit balances.

To maintain the balance, the left side (debits) has to equal the right side (credits). So, if you a debit entry, you are going to have to have a credit entry to equal it. There might be transactions that require one debit entry and two credit entries, which must add up to the same amount as that one debit entry.

Using the Normal Balance

What is the significance of the normal balance? Knowing the normal balance of each account is key to being able to records the transactions correctly and maintain the balance in the accounting equation. This information is also valuable when it comes to spotting any inconsistencies. For example, if a Liability account has a debit balance, then it is necessary to check if no errors were made in the bookkeeping records.

At the same time, just because the normal balance of a particular account is debit (or credit), it does not mean the account’s balance will be debit (or credit). Normal balance is just a way of telling which side the transaction would increase and which side it would decrease.{“@context”:”https://schema.org”,”@type”:”FAQPage”,”mainEntity”:[{“@type”:”Question”,”name”:”What do you mean by normal balance?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” Normal balance is the ability to maintain a stable body position in space.”}},{“@type”:”Question”,”name”:”What does a normal debit balance mean?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” A normal debit balance is the amount of money that you have in your checking account.”}},{“@type”:”Question”,”name”:”What is the normal balance of a liability?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” The normal balance of a liability is the amount of money owed by an individual or company.”}}]}

Frequently Asked Questions

What do you mean by normal balance?

Normal balance is the ability to maintain a stable body position in space.

What does a normal debit balance mean?

A normal debit balance is the amount of money that you have in your checking account.

What is the normal balance of a liability?

The normal balance of a liability is the amount of money owed by an individual or company.