Identify the Normal Balance for Asset and Liability Accounts

Question

Examlex · Accepted Answer

The Answer is Using a T-account format,the normal balance of any account is the side that increases the balance in the account.For asset accounts the normal balance would be the debit side of the T-account.Asset accounts are often referred to as "debit-balance accounts." Crediting a liability account increases its balance,so it has a normal balance of a credit.Liability accounts are called "credit-balance accounts."
The reason why assets are debit-balance accounts and liabilities are credit-balance accounts is caused by the accounting equation."Assets equal liabilities plus shareholders' equity" means that asset and liability accounts must have opposite normal balances for the equation to balance.

Identify the Normal Balance for Asset and Liability Accounts

Definitions: