Normal balance
In accounting, normal balance means the side that increases an account — debit for assets and expenses, credit for liabilities, equity and revenue, inverted for a contra account.
- Layer
- Lexicon
- Defined in
- Lexicon
- Components
- 2
Not a rule
Bookkeeping convention — not codified. US GAAP governs recognition, measurement and presentation — not the mechanics a bookkeeper uses to get there. Anyone citing a standard for this word is citing the wrong thing.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
The lessons that teach this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
- 03Accounts, and the five typesEvery account belongs to exactly one of five types, and its type decides which side increases it. Get the type right and the entry writes itself.9 min
- 04Debits and creditsDebit means left and credit means right. Not good and bad, not plus and minus. Stop translating them into signs and everything else gets easier.8 min
- 07The trial balanceEvery account, netted onto one side, with both columns summed. It proves the arithmetic, and you need to know exactly how much it does not prove.10 min
Normal balance, in use
Quoted from the 3 documents that use the word — what it does to an interface, in the spec's own sentence.
Each has a normal balance — the side that increases it.
Shows the normal balance (Dr/Cr) — a user posting to an unfamiliar account needs to know which side increases it.
Contra accounts — accumulated depreciation, allowance for doubtful accounts — carry the opposite normal balance to their type and present as a deduction from their parent, so the picker has to state theirs rather than infer it from the type.
How to build a general ledger table in React — 3. Show the normal balance
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- positive balance
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
Components that render the terms it depends on
Little in the catalog names this concept outright, but its definition is built out of others that are named. These render account, revenue, credit, equity, debit.
2Cards
Family spec3Payments
Family spec5Ledger & tables
Family spec- AccountTieOutEvery BS account, proven against its evidence.
- AccountRegisterGL detail with a running balance.
- DimensionPickerEntity always required; renders what the account demands.
- RevenueWaterfallDeferred balance recognizing by future period.
- JournalEntryDebit and credit as two columns. No signed-column variant.
13Metrics & analysis
Family specTerms this one depends on
- Contra accountAn account with the opposite normal balance to its type, presented as a deduction from its parent — accumulated depreciation against PP&E, the allowance against AR
- AccountA GL account in the chart of accounts. Always qualify when a bank account is meant.
- RevenueInflows or enhancements of assets, or settlements of liabilities, from delivering goods or services — recognized when control transfers, not when cash arrives
- CreditThe right column. It increases liabilities, equity and revenue, and decreases assets and expenses.
- EquityThe residual interest in the assets that remains after deducting liabilities (FASB CON 8 ¶E61)
- DebitThe left column. It increases assets and expenses, and decreases liabilities, equity and revenue.
Also in Core ledger
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.