In a business, the meaning of debit and credit balances differs based on whether you view them from the customer’s or the vendor’s perspective.
Customer Ledger:
- Debit balance: The customer owes you money (outstanding receivable).
- Credit balance: You owe the customer (e.g., advance payment received or overpayment).
Vendor Ledger:
- Debit balance: You paid more than you owe the vendor (advance paid or refund receivable).
- Credit balance: You owe the vendor money (outstanding payable).