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.
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.
|To ABCD||1000||By ZYX||500|
|To XYZ||2500||By CBA||2000|
|By Balance c/d||1000|
Above example shows debit balance in cash account which is shown on the credit side.
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.
|To Cash A/C||10,000||By Purchases A/C||25,000|
|To Balance c/d||15,000|
Above example shows credit balance in creditor’s account which is shown on the debit side.