Business Finance
Discuss the Concept of Normal Balance

Question Description

Why would a deposit to your bank account appear as a credit when a debit normally increases the cash account? How does this apply to the concept of "Normal Balance"? What is the concept of "Normal Balance"?

Final Answer

t's because the bank statement is written from the POV (bank's point of view). 

In the double entry system, a debit entry is an increase in an asset or expense/decrease in income or a liability while a credit entry is an increase in a liability or income/decrease in an asset or expense. 

When you pay money into the bank this increases the amount the bank owes you or decreases the amount you owe the bank. From the bank's point of view this means an increase in the amount they owe you (their liabilities have increased) or a decrease in the amount you owe them (their assets have decreased). 

Hence, an increase in your cash balance at the bank is a credit entry on the statement your bank sends you.

Normal Blance is What is expected from a particular account, based on the balance sheet of this account. Credit and debit balances are also called normal balance.

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Duke University

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