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In accounting, the normal balance of an account is the preferred 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 and expense accounts have a normal debit balance, while liability, equity and income accounts have a normal credit balance.^[1] Generally a normal balance is shown in statements as a positive number and an abnormal balance as negative. In the case of a contra account, however, the normal balance convention is reversed and a normal balance is reported as a negative number.

An abnormal balance can indicate an accounting or payment error; cash on hand should never have a net credit balance, since one cannot credit (pay from) cash what has not been debited (paid in). Similarly, there is little reason for a business to pay a liability in excess of what it owes. On the other hand, a business that has not reached profitability will debit a cumulative earnings/loss equity account with its losses, resulting in a negative balance. This indicates a risk to the business, but not an error.

References

^ Flannery, David A. (2005). Bookkeeping Made Simple. pp. 18–19.

[1] Flannery, David A. (2005). Bookkeeping Made Simple. pp. 18–19.

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 {{Short description|Classification of an account}}
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-In [[accounting]], the '''normal balance''' for an account is the type of net balance that is shown as a [[positive number]] in statements.
+In [[accounting]], the '''normal balance''' of an account is the preferred 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]] and [[expense]] accounts have a normal debit balance, while [[Liability (financial accounting)|liability]], [[equity (finance)|equity]] and [[income]] accounts have a normal credit balance.<ref>{{cite book|last=Flannery|first=David A.|year=2005|title=Bookkeeping Made Simple|pages=18–19}}</ref> For [[contra account]]s of each type, the normal balance convention is reversed.
+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]] and [[expense]] accounts have a normal debit balance, while [[Liability (financial accounting)|liability]], [[equity (finance)|equity]] and [[income]] accounts have a normal credit balance.<ref>{{cite book|last=Flannery|first=David A.|year=2005|title=Bookkeeping Made Simple|pages=18–19}}</ref> Generally a normal balance is shown in statements as a [[positive number]] and an abnormal balance as negative. In the case of a [[contra account]], however, the normal balance convention is reversed and a normal balance is reported as a negative number.
 An abnormal balance can indicate an accounting or payment error; [[cash]] on hand should never have a net credit balance, since one cannot credit (pay from) cash what has not been debited (paid in). Similarly, there is little reason for a business to pay a liability in excess of what it owes. On the other hand, a business that has not reached profitability will debit a cumulative earnings/loss equity account with its losses, resulting in a negative balance. This indicates a risk to the business, but not an error.