Definition of Debit Balance
Accounting uses a system called double-entry bookkeeping. Double-entry book keeping uses debits and credits for journal entries. For each transaction, debits must equal credits. The general ledger contains information on all account transactions, whether the accountant debited the account or credited the account. A debit balance means the account has more debits in terms of money debited into the account, than credits.
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T Account
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A T account is shaped like a large T. The left side of the T account contains all the debits during the year. The right side of the T account contains all the credits during the year. If the account has more debits on the left side of the account than credits on the right side of the account, it has a debit balance.
Assets
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Assets are any item that holds future value for the company. Examples of assets are cash, accounts receivable and property. Assets should have a debit balance.
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Expenses
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Expenses are cash outflows from a company's usual business. For example, cost of goods sold and administrative expenses are expenses on the income statement. To increase expenses, the accountant must debit the expense account.
Losses
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Losses are cash outflows from the company for non-operating related items. Examples of losses include loss from a lawsuit and a loss from the sale of equipment. To increase losses, the accountant must debit the account.
Dividends
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Dividends are when a company pays out of earnings, a set amount of money per share to their stockholders. If a dividend account has a debit balance, it means the company paid dividends during the year.
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References
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