Editing Normal balance

{{Short description|Notational convention in accounting}}
{{more citations needed|date=July 2023}}
In [[accounting]], the '''normal balance''' of an account is the type of net balance that it should have.

Any particular account contains [[debit and credit]] entries. The account's net balance is the difference between the total of the debits and the total of the credits. This can be a net debit balance when the total debits are greater, or a net credit balance when the total credits are greater. By convention, one of these is the normal balance type for each account according to its category. [[Asset]] and [[expense]] accounts have a normal debit balance, while [[Liability (financial accounting)|liability]], [[equity (finance)|equity]] and [[income]] accounts have a normal credit balance.<ref>{{cite book|last=Flannery|first=David A.|year=2005|title=Bookkeeping Made Simple|pages=18–19}}</ref> Generally a normal balance is shown in statements as a [[positive number]]. In the case of a [[contra account]], however, the normal balance convention is reversed and a normal balance is reported either as a negative number, or alongside its parent balance as an amount subtracted.

An abnormal balance often indicates an accounting error. [[Cash]] on hand should never have a net credit balance, since one cannot credit (pay from) cash what has not been debited (paid in). Similarly, if a liability account happens to be overpaid, it would be incorrect to continue reporting it as a liability with a debit balance because it no longer represents an amount owed. It would properly be reported as an asset, and possibly [[written off]] to a zero balance if the overpayment is not recoverable.

==References==
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[[Category:Accounting terminology]]