What is a Credit Balance?
Accounts can either have a credit balance or a debit balance depending on the type of account.
The expanded accounting equation is stated as follows:
Items on the left are normally debits and items on the right are normally credits, so liabilities, equity, and income type accounts normally have a credit balance.
If an account which is normally a debit (assets and expenses) shows a credit balance then it usually indicates an error in the accounting system.
A full list of accounts can be seen on our debits and credits chart. If on the chart an account would normally be increased by a credit, then the account would normally have a credit balance.
For further information on the meaning of this term see the Wikipedia definition.
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About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.