Can assets ever have a credit balance?

An asset is a resource in the name of the company or controlled by the company that holds economic value and will provide it future benefits.

A company invests in various kinds of assets for manufacturing purposes and investment purposes as well. Some examples of assets are:

• Plant and Machinery
• Investments
• Inventory
• Cash and Cash Equivalents, etc.

Assets can be broadly divided into two categories based on their physical existence:

• Tangible Assets
• Intangible Assets

Tangible Assets can be further divided into two categories based on their life and role in the operating cycle:

• Non-Current Assets
• Current Assets

Since the company derives benefit from the asset, an asset account is debit in nature. If an asset account has a credit balance, it would fundamentally make it a liability. However, there are certain exceptions to it.

In the case of Bank Overdraft, which means a company withdraws more from the bank than it has deposited in its account, Bank Account can also be shown having a credit balance.

Contra Assets Accounts are the accounts that are contrary to the basic nature of an assets account, that is it is contrary to the debit nature of the assets account and hence are credit in nature.

Examples of Contra Assets Account are:

Accumulated Depreciation Account which is essentially Plant Assets Account also has a credit balance as it is used to depreciate the asset, or in other words, reduce the value of the assets, hence it also has a credit balance.

When there are balances in the Account Receivables Account that are not paid to the company or have a very low probability of being paid, they are recorded in a separate account called Bad Debts Account, which is also credit in nature.