Ajay Mady In: Category - AssetsWhat is the meaning of assets have debit balance and liabilities have credit balance?assetscredit balancedebit balanceliabilities ShareFacebook1 AnswerVotedRecent Vaishnavi_Shetty 2020-07-30T01:25:38+05:30Added an answer on July 30, 2020 at 1:25 am This answer was edited. What is Debit balance?While preparing a ledger account (T-account), if the sum of the debit side is greater than the sum of the credit side, then we say that the account has a “debit balance“.Debit side > Credit sideAssets have debit balanceLet me help you understand this concept correlating it with the golden and modern rule & with an example.1. Golden rule of accounting for real account (ie. assets like plant & machinery, furniture & fixtures, etc) is-Debit what comes in, Credit what goes out2. Modern rule of accounting states-Debit the increase in asset, Credit the decrease in assetKeeping this in mind, we will move forward to an example.Example for Asset A/cSamsung Inc. acquired 2 plant & machinery for 2,50,000. Out of the 2, it sold 1 for 1,00,000. Also, 20,000 depreciation was charged. So, the ledger account for plant & machinery will be presented as follows in the books of Samsung Inc.-Plant & Machinery A/cTo Bank A/c2,50,000By Bank A/c1,00,000By Depreciation A/c20,000**By Balance c/d1,30,000Total2,50,000Total2,50,000With the purchase of 2 plant & machinery, there will be an increase in the overall assets of Samsung Inc. So, we will have to debit the purchase/increase in the asset. And on the sale of any asset purchased before, you need to credit the asset account.Therefore, in general, the debit side of an asset account will be > than the credit side, resulting into a debit balance.So, in this example, the above ledger shows the debit balance (debit side > credit side) in plant & machinery A/c (By Balance c/d – 1,30,000).What is Credit balance?While preparing a ledger account (T-account), if the sum of the credit side is greater than the sum of the debit balance, then we say that the account has a “credit balance“.Credit side > Debit sideLiabilities have credit balanceAgain, let just interpret this concept correlating it with the rules along with an example.1. Golden rule of accounting for personal account (eg. creditors) is-Debit the receiver, Credit the giver2. Modern rule of accounting states-Credit the increase in liability, Debit the decrease in liabilityKeeping these rules in mind, let me help you know why liabilities have a credit balance with an example.Example for Liabilities A/cABC Ltd purchased raw materials from its supplier XYZ Ltd for 5,00,000. During the month it could only make payments of 25,000 and 40,000 to the supplier. The remaining amount is still outstanding. So, the ledger account for XYZ Ltd (Creditors A/c) in the books of ABC Ltd will be presented as follows-XYZ Ltd A/cTo Bank A/c25,000By Purchase A/c5.00,000To Bank A/c40,000**To Balance c/d4,35,000 Total5,00,000Total5,00,000XYZ Ltd has been credited with 5,00,000 because he is the supplier of raw materials (credit the giver). Also, ABC Ltd is now liable to pay 5,00,000 (credit the increase in liability). Then as and when we pay XYZ Ltd, there will be a decrease in the liability, therefore debit. The liability account will show a credit balance until we discharge the dues completely.So, in general, you will always see the credit side of the liability account to be > than the debit side.In this example, the above ledger shows the credit balance (credit side > debit side) in XYZ Ltd A/c (To Balance c/d – 4,35,000).0Reply Share ShareShare on FacebookShare on TwitterShare on LinkedInShare on WhatsAppLeave an answerCancel replyYou must login or register to add a new answer.