What is the normal balance for liabilities?

The normal balance for liabilities is a credit balance. This means that, under double-entry accounting, when liabilities increase, they are recorded on the credit side of the ledger, and when they decrease, they are recorded on the debit side.

Liabilities represent obligations that a company has to settle in the future; they include debts and loans the company must repay. Since these obligations are anticipated future outflows of resources, they are expected to grow in value as the company incurs more debts. That is why their normal balance is a credit.

In contrast, assets and expenses typically have debit balances. Understanding this system of balances helps in creating accurate financial statements, ensuring that the accounting equation (Assets = Liabilities + Equity) remains in balance. Thus, recognizing that liabilities normally carry a credit balance is fundamental for anyone studying financial accounting.