accounting Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activit ...

, the normal balance of an account is the type of net balance that it should have. Any particular account contains debit and credit entries. The account's net balance is the difference between the total of the debits and the total of the credits. This can be a net debit balance when the total debits are greater, or a net credit balance when the total credits are greater. By convention, one of these is the normal balance type for each account according to its category.

Asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...

and

expense An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition i ...

accounts have a normal debit balance, while liability, equity and

income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. F ...

accounts have a normal credit balance. Generally a normal balance is shown in statements as a

positive number In mathematics, the sign of a real number is its property of being either positive, negative, or 0. Depending on local conventions, zero may be considered as having its own unique sign, having no sign, or having both positive and negative sign. ...

. In the case of a

contra account Debits and credits in double-entry bookkeeping are entries made in Account (accountancy), account ledgers to record changes in Value (economics), value resulting from business transactions. A debit entry in an account represents a transfer of ...

, however, the normal balance convention is reversed and a normal balance is reported either as a negative number, or alongside its parent balance as an amount subtracted. An abnormal balance often indicates an accounting error.

Cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In book-keeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-i ...

on hand should never have a net credit balance, since one cannot credit (pay from) cash what has not been debited (paid in). Similarly, if a liability account happens to be overpaid, it would be incorrect to continue reporting it as a liability with a debit balance because it no longer represents an amount owed. It would properly be reported as an asset, and possibly written off to a zero balance if the overpayment is not recoverable.

References

{{reflist Accounting terminology