Definition of Debit Balance
In accounting, a debit balance refers to a general ledger account balance that is on the left side of the account. This is often illustrated by showing the amount on the left side of a T-account.
Examples of Accounts with Debit Balances
The following general ledger account classifications normally have debit balances:
- Asset accounts
- Expense accounts
- Loss accounts (Loss on Sale of Plant Asset, Loss from Lawsuit, etc.)
- Sole proprietor's drawing account
The double-entry system requires that the general ledger account balances have the total of the debit balances equal to the total of the credit balances. This occurs because every transaction must have the debit amounts equal to the credit amounts. For example, if a company borrows $10,000 from its local bank, the company will debit its asset account Cash for $10,000 since the company's cash balance is increasing. The same entry will credit its liability account Notes Payable for $10,000 since that account balance is also increasing.
