What is Debit Balance and Credit Balance?

Debit Balance and Credit Balance

A ledger account can have both debit or a credit balance which is determined by which side of the account is greater than the other. Debit balance and credit balance are often used terms in the accounting world hence it is important to understand the distinction and their exact meaning.

Debit Balance

While preparing an account, if debit side is greater than the credit side, the difference is called “Debit Balance”. So, if Debit Side > Credit Side, it is a debit balance.

 

Cash Account

 To ABCD  1000  By ZYX  500
 To XYZ  2500  By CBA  2000
      By Balance c/d  1000
 Total  3,500  Total  3,500

 

Above example shows debit balance in cash account which is shown on the credit side.

 

Credit Balance

When credit side is greater than the debit side, the difference is called “Credit Balance”. So, if Credit Side > Debit Side, it is a credit balance.

 

Creditor’s Account

 To Cash A/C  10,000  By Purchases A/C  25,000
 To Balance c/d  15,000     
 Total  25,000  Total  25,000

 

Above example shows credit balance in creditor’s account which is shown on the debit side.