As usual, debits will be shown on the left and credits on the right. When recording a transaction, it is always important to put data in the proper column. Is the Rent Expense account classified as an asset, a liability, an owner’s equity, a revenue, or an expense account? State whether the normal balance is a debit or a credit. Is the Wages Expense account classified as an asset, a liability, an owner’s equity, a revenue, or an expense account?

Nanonets online OCR & OCR API have many interesting use cases that could optimize your business performance, save costs and boost growth. Find out how Nanonets’ use cases can apply to your product. Several ways to automate Accounts Payable include using software or outsourcing the process to a third-party provider.

Normal Balance For Assets

Automate invoice payments with AI. An agreement between the firm and the seller may take the form of a contract or an agreement, and it is this document specifies the credit conditions to be applied. They are an example of a liability regarded as on the shorter end of the time spectrum. Let’s recap which accounts have a Normal Debit Balance and which accounts have a Normal Credit Balance. Then, I’ll give you a couple of ways to remember which is which. We want to specifically keep track of Dividends in a separate account so we assign it a Normal Debit Balance.

Considering automating Accounts Payable, it is important to weigh the pros and cons of each option to determine which is best for your organization. When analyzing a company’s turnover ratio, it is important to do so in the context of its peers in the same industry. Automate data capture, build workflows and streamline the Accounts Payable process in seconds. Book a 30-min live demo now.

What is the normal balance?

The key to understanding how accounting works is to understand the concept of Normal Balances. Harold Averkamp has worked as a university accounting instructor, accountant, and consultant for more than 25 years. He is the sole author of all the materials on AccountingCoach.com. Review all the Normal Balances standard listed within the document to gain pertinent knowledge of accounting at IU. After reviewing, if users have questions, reach out to the campus office or the Accounting and Reporting Services team at The company purchases $500 of supplies from a vendor and receives an invoice, but doesn’t pay the invoice yet.

To better visualize debits and credits in various financial statement line items, T-Accounts are commonly used. Debits are presented on the left-hand side of the T-account, whereas credits are presented on the right. Included below are the main financial statement line items presented as T-accounts, showing their normal balances.

Financial and Managerial Accounting

This means that when money is owed to someone, it is considered to be credit. On the other hand, when someone owes normal balance of an account you money, it is considered to be a debit. In this case, accounts payable would be classified as a debit.