For asset and expense accounts, what is the normal balance?

Asset and expense accounts are designed to reflect the resources owned and the costs incurred by a business. The normal balance for these accounts is a debit balance.

When it comes to assets, they represent the economic resources that a company controls, which inherently increases when assets are debited. For instance, when a business purchases equipment or inventory, these transactions are recorded as a debit to asset accounts, increasing their total value.

Expense accounts similarly track costs incurred by the business in the process of generating revenue. When a company incurs an expense, such as rent or utilities, it is recorded as a debit, which again leads to an increase in the total of the expense account.

This debit nature is fundamental in double-entry accounting, where each transaction must balance between debits and credits. Assets and expenses increase with debits and decrease with credits, providing a clear differentiation from liability, equity, and revenue accounts, which typically have a credit balance. This understanding of normal balances is crucial for accurately recording and interpreting financial transactions within the accounting framework.