Definition of Credit Balance
A credit balance refers to the balance on the right side of a general ledger account or T-account.
Normally, the liability and owner’s (stockholders’) equity accounts have credit balances. In other words, their balances are on the right side of the accounts similar to their position in the accounting equation: assets = liabilities + owner’s equity. The revenue accounts (which are temporary accounts) also have credit balances because revenues cause the owner’s equity account balances to increase.
Contra asset accounts and contra expense accounts will also have credit balances.
Example of Accounts Where Credit is Not the Normal Balance
Accounts where a credit balance is NOT the normal balance include the following:
- Asset accounts (other than contra asset accounts such as Allowance for Doubtful Accounts and Accumulated Depreciation)
- Expense accounts (other than a contra expense account)
- Contra revenue accounts (such as Sales Discounts, Sales Returns and Allowances)
- Owner’s Drawing account
- Treasury Stock account
