Notes #3: The Normal Balance

The basic accounting equation has two sides, namely debit and credit. Each side increases and decreases depending on the transaction.

For example, Cash increases on the debit side, and conversely it decreases on the credit side. A side that increases often will have a positive value and that is called the normal balance. In our example, the Cash account has a normal balance on the debit side, because increases are placed on the debit side.

Another example, Owner’s Equity increase on the credit and decrease on the debit. A positive value is found on the credit, hence the normal balance for Owner’s Equity is credit normal balance.


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