The side of the account that is increased is called its “normal balance.” Every account in accounting increases on one specific side, either the debit (left) side or the credit (right) side, depending on the type of account. Assets, expenses, and drawing accounts increase on the debit side. Liabilities, equity, and revenue accounts increase on the credit side.
How Debits and Credits Work
Every transaction in accounting gets recorded with at least one debit and one credit. A debit is simply an entry on the left side of an account, and a credit is an entry on the right side. Neither word means “good” or “bad” on its own. What matters is the type of account you’re working with, because that determines whether a left-side entry (debit) or a right-side entry (credit) makes the balance go up.
This system traces back to the accounting equation: Assets = Liabilities + Equity. Assets sit on the left side of that equation, so they increase on the left (debit) side. Liabilities and equity sit on the right side, so they increase on the right (credit) side. Every other account type follows from this same logic.
Which Side Increases Each Account Type
Here is the complete breakdown for all major account categories:
- Assets increase with a debit (left side). Cash, equipment, accounts receivable, and inventory are all asset accounts. Recording a debit raises their balance; recording a credit lowers it.
- Liabilities increase with a credit (right side). Accounts payable, loans payable, and unearned revenue are liability accounts. A credit entry raises their balance.
- Equity increases with a credit (right side). Owner’s capital or stockholders’ equity grows when you record a credit.
- Revenue increases with a credit (right side). Sales revenue, service revenue, and interest income all follow this rule. Because revenue ultimately increases equity, it shares the same increase side.
- Expenses increase with a debit (left side). Rent expense, wages expense, and utilities expense go up with a debit entry. This makes sense because expenses reduce equity, so they behave opposite to equity itself.
- Drawing or dividends increase with a debit (left side). When an owner withdraws money, the drawing account is debited. Like expenses, drawing reduces equity, so it increases on the opposite side from equity.
Why It’s Called the Normal Balance
An account’s normal balance is simply the side (debit or credit) that makes its total go up. If you look at any healthy asset account, its running total will be a debit balance, because debits have been added more than credits. A liability account will normally carry a credit balance. When an account ends up on the opposite side from its normal balance, that usually signals an error or an unusual situation, like a checking account that has been overdrawn.
Knowing the normal balance also tells you what a decrease looks like. To reduce an asset, you record a credit. To reduce a liability, you record a debit. The decrease is always the opposite side from the increase.
A Simple Way to Remember the Rules
One popular mnemonic groups the account types by their increase side. Accounts that increase with a debit can be remembered as DEA: Drawing (or Dividends), Expenses, Assets. Accounts that increase with a credit can be remembered as RLC: Revenue, Liabilities, Capital (Equity). Some textbooks flip the letters to ADE and LCR, but the grouping is the same.
Another approach is to think in terms of the accounting equation. Anything on the left side of Assets = Liabilities + Equity increases on the left. Anything on the right side increases on the right. Then remember that expenses and drawing act as reductions to equity, so they flip to the left. Revenue adds to equity, so it stays on the right.
Putting It Into Practice
Suppose a business pays $1,000 in rent. Rent expense is an expense account, which increases with a debit, so you debit Rent Expense for $1,000. Cash is an asset account, which decreases with a credit, so you credit Cash for $1,000. Both entries follow the normal balance rules.
Now suppose a business earns $5,000 from a customer on credit (meaning the customer will pay later). Accounts Receivable is an asset, so it increases with a $5,000 debit. Service Revenue is a revenue account, so it increases with a $5,000 credit. The total debits equal the total credits, and each account moved on its correct side.
Once you internalize which side increases each account type, journal entries become far more intuitive. Every transaction is just a matter of identifying the accounts involved, deciding whether each one is going up or down, and then recording the entry on the correct side.