Balances

looking at a T-account for each of the account classifications in the general ledger, here is the debit or credit balance you would normally find in the account:
Account Classification

Normal
Balance
Assets
Debit
Contra asset
Credit
Liability
Credit
Contra liability
Debit
Owner's Equity
Credit
Stockholders' Equity
Credit
Owner's Drawing or
Dividends Account
Debit
Revenues (or Income)
Credit
Expenses
Debit
Gains
Credit
Losses
Debit

Revenues and Gains
Revenues and gains are recorded in accounts such as Sales, Service Revenues, Interest Revenues (or Interest Income), and Gain on Sale of Assets. These accounts normally have credit balances that are increased with a credit entry.

The exceptions to this rule are the accounts Sales Returns, Sales Allowances, and Sales Discounts--these accounts have debit balances because they are reductions to sales. Accounts with balances that are the opposite of the normal balance are called contra accounts; hence contra revenue accounts will have debit balances.

Account Name Debit Credit
Cash 50
Service Revenues 50


Whenever cash is received, the asset account Cash is debited and another account will need to be credited. Since the service was performed at the same time as the cash was received, the revenue account Service Revenues is credited, thus increasing its account balance.


Let's illustrate how revenues are recorded when a company performs a service on credit (i.e., the company allows the client to pay for the service at a later date, such as 30 days from the date of the invoice). At the time the service is performed the revenues are considered to have been earned and they are recorded in the revenue account Service Revenues with a credit. The other account involved, however, cannot be the asset Cash since cash was not received. The account to be debited is the asset account Accounts Receivable. Assuming the amount of the service performed is $400, the entry in general journal form .