This is a presentation on normal balances in accounting. Some accounts have debit balances
while other accounts have credit balances. Most learn about normal balances as they
learn about debits and credits.
So what increases an account? It depends on the account. Some accounts increase with debits while other accounts
increase with credits. So let's take a look at some accounts that increase with debits. Some accounts are asset accounts,
some are expense accounts and some are withdrawal accounts. Let's take a look at some asset accounts.
Some examples of asset accounts are cash, accounts receivable
inventory and equipment. We would say that cash normally has a debit balance.
Let's take a look at some expense accounts. Some examples of expense accounts are rent, salaries
utilities and insurance. Let's take a look at some withdrawal accounts. Some examples owner
withdrawals and in the case of corporations, dividends.
Those were some examples of accounts that increase with debits. Let's take a look at accounts that
increase with
credits. Some account that increase with credits are revenue accounts, liability accounts and capital accounts. Let's take a look
at revenues first. Some examples of revenue accounts are sales, doctor fees and interest income.
We would say that sales normally has a credit balance. Let's look
at some liability accounts. Some examples of liability accounts are accounts payable, accrued
expenses bank loan payable and deferred revenue. And let's take a look at
capital accounts. Some examples of capital accounts are owner contributions and, in the case of corporations, common shares.
So those were some examples of accounts that increase with credits. So what increases an account?
Well in the case of asset accounts and withdrawal accounts and expense accounts,
they increase with debits. Liability, capital and revenue accounts increase with credits. And it
works the other way too. Asset accounts, withdrawal accounts and expense accounts decrease
with credits, while liability, capital and revenue accounts decrease with debits. So as a summary, Cash
is an asset account so it has a debit balance normally. When cash is received in a
business, the account Cash is debited. When the business pays out cash, the account
Cash is credited. Sales is a revenue account so it normally has a credit
balance.
When sales increase, the accountants credit
the sales account and if the sales account needs to be decreased,
the account is debited. I hope you enjoyed the video. Thank you for watching!