Debit balance definition

Examples of these accounts are the cash, accounts receivable, prepaid expenses, fixed assets (asset) account, wages (expense) and loss on sale of assets (loss) account. Contra accounts that normally have debit balances include the contra liability, contra equity, and contra revenue accounts. An example of these accounts is the treasury stock (contra equity) account.

which of the following accounts has a normal debit balance

The golden rules of accounting are fundamental to understanding an account’s normal balance. Accounts with debit balances can be decreased with a credit entry, and accounts with credit balances can be reduced with a debit entry. A debit balance is a negative cash balance in a checking account with a bank. Alternatively, the bank will increase the account balance to zero via an overdraft arrangement. In accounting, a debit balance refers to a general ledger account balance that is on the left side of the account. This is often illustrated by showing the amount on the left side of a T-account.

Examples of Accounts with Debit Balances

Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years.

There are several meanings for the term debit balance that relate to accounting, bank accounts, lending, and investing. A debit balance is the amount of cash that a broker lends to an investor’s margin account to purchase securities, and which the investor must pay into the account before the purchase transaction can be completed. Understand these critical pieces of notation by exploring the definitions and purposes of debits and credits and how they help form the basics of double-entry accounting. A debit balance is the remaining principal amount of debt owed to a lender by the borrower. If the borrower is repaying the debt with regular installment payments, then the debit balance should gradually decline over time.

Debit Balance in Accounting

The double-entry system requires that the general ledger account balances have the total of the debit balances equal to the total of the credit balances. This occurs because every transaction must have the debit amounts equal to the credit amounts. For example, if a company borrows $10,000 from its local bank, the company will debit its asset account Cash for $10,000 since the company’s cash balance is increasing. The same entry will credit its liability account Notes Payable for $10,000 since that account balance is also increasing. A debit balance is an account balance where there is a positive balance in the left side of the account. Accounts that normally have a debit balance include assets, expenses, and losses.