Course Outline
Join PRO

Why will some asset accounts have a credit balance?

Author:
Harold Averkamp, CPA, MBA

Definition of Asset Account Balances

In accounting, asset accounts normally have debit balances. That is, the general ledger accounts for assets typically have their balances on the left side. This is also the case with T-accounts and is consistent with the accounting equation ( Assets = Liabilities + Owner’s Equity) where the asset account balances are on the left side.

However, there are a few general ledger asset accounts that must have credit balances. These accounts are known as contra asset accounts since their credit balances are contrary to the usual debit balances found in most asset accounts.

Examples of Asset Accounts with Credit Balances

Two examples of contra asset accounts are:

There are also situations where an unwanted credit balance appears and will need attention. Here are a few examples:

  • An error caused by posting an amount to an incorrect account
  • Continuing to depreciate or amortize an asset after the carrying value has been reduced to $0
  • Receiving and posting a customer’s payment that was greater than the customer’s balance in Accounts Receivable
  • Continuing to reduce the balance in Prepaid Expenses and charging expense after the balance in Prepaid Expenses has been reduced to $0
  • The amount of checks written exceeded the positive amount in the Cash account

Before issuing the balance sheet, any errors (such as first two items) need to be corrected. The accounts with credit balances such as those in the last 3 items above need to be reclassified to a current liability account.

Join PRO to Track Progress

Features

Free

PRO

Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Dictionary
Bookkeeping Video Training
Financial Statements Video Training
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Flashcards
Crossword Puzzles
Word Scrambles with Coaching
Bookkeeping Study Guide
Managerial and Cost Accounting Study Guide
Certificates of Achievement
Bookkeeping Certificate of Excellence
Business Forms
Printable PDF Files
Progress Tracking
Motivational Badges and Points
Motivational Medal Rankings
Motivational Activity Streaks
Public Profile Page of Achievements

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 3,033 Testimonials

PRO for Teams
  • Easily onboard new users and team admins
  • Monitor individual user progress and grades
  • Monitor team progress and compare users
  • View average grades and find problem areas
  • Monitor recent activity and user achievements
PRO for Teams
Take the Tour Join Pro Upgrade to Pro