Normal Balances in Accounting Video Transcript

This is a presentation on normal balances in accounting. Some accounts have debit

balances. While other accounts have credit balances. Most learn about normal
balances as they learn about debits and credits. So what increases and account? It
depends on the account. Some accounts increase with debits while other accounts
increase with credits.

So let's take a look at some accounts that increase with debits. Some accounts are
asset accounts, some are expense accounts, and some are withdrawal accounts.
Let's take a look at some asset accounts. Some examples of asset accounts are
cash, accounts receivable, inventory and equipment. We would say that cash
normally has a debit balance.

Let's take a look at some expense accounts. Some examples of expense accounts
are rent, salaries, utilities, and insurance. Now let's take a look at some withdrawal
accounts. Some examples are owner withdrawals, and in the case of corporations,
dividends. Those were some examples of accounts that increase with debits.

Let's take a look at accounts that increase with credits. Some accounts that
increase with credits are revenue accounts, liability accounts, and capital accounts.
Let's take a look at revenues first. Some examples of revenue accounts are sales,
doctor fees, and interest income. We would say that sales normally has a credit
balance.

Let's look at some liability accounts. Some examples of liability accounts are
accounts payable, accrued expenses, bank loan payable, and deferred revenue. And
let's take a look at capital accounts. Some examples of capital accounts are owner
contributions, and in the case of corporations, common shares. So those were some
examples of accounts that increase with credits.

So what increases an account? Well in the case of asset accounts and withdrawal
accounts and expense accounts, they increase with debits. Liability, capital and
revenue accounts increase with credits. And it works the other way too asset
accounts withdrawal accounts and expense accounts, decrease with credit while
liability, capital, and revenue accounts decrease with debits.
So as a summary, cash is an asset account so it as a debit balance normally. When
cash is received in a business, the account cash is debited. When the business pays
out cash, the account cash is credited. Sales is a revenue account so it normally
has a credit balance.

When sales increase, the accountants credit the sales account. And if the sales
account needs to be decreased, the account is debited. I hope you enjoyed the
video. Thank you for watching.