6/10/2023 0 Comments Debit credit expense account![]() ![]() With regard to expense accounts, they will always end in debit balances. It is rare, very rare for even a credit entry to be posted to an expense account. Credits do happen and are most often a function of some type of purchase return to a supplier or a vendor providing a credit related to services rendered. The following are some examples of credits posted to expense accounts:ġ) Often banks will subtract or take back a fee charged to their client for relationship purposes. AS AN EXAMPLE, THE PAYROLL JOURNAL FEEDS ENTRIES TO COST OF SALES, EXPENSES, LIABILITIES, AND TO THE ASSET TYPE OF ACCOUNTS. JOURNALS ACT AS SOURCES OF INFORMATION AND FEED DEBITS AND CREDITS TO MORE THAN ONE TYPE OF AN ACCOUNT. BOTH SIDES OF THE ENTRY ARE THEN TRANSFERRED TO THE RESPECTIVE LEDGER (ACCOUNT) FOR FINAL POSTING. THE JOURNALS RECORD BOTH THE DEBIT AND THE CREDIT. JOURNALS ARE USED TO RECORD ECONOMIC TRANSACTIONS IN CHRONOLOGICAL DATE ORDER. For example, the purchases journal feeds information to Cost of Sales and to Expenses. If you are unsure of what this is referring to here, then please read Lesson 3 explaining ledgers and journals. From above, the primary expense in the overhead section (expense types of accounts) is management payroll. Therefore, the payroll journal is one of the primary sources of the debits that are posted to the expense ledgers. The secondary journal is of course the purchases journal. For those of you following this series of lessons, you should immediately realize that journals can feed information to different types of accounts. Now let’s get back to debits and credits.Īs explained in Lesson 2, the dual entry system used in bookkeeping uses debits and credits to ensure balance in the books. Expense accounts receive their debits mostly from two respective journals. The goal for the reader is to understand that these expenses can be grouped under the various terms described above. Other – banking, meals and entertainment, travel, training & miscellaneous.Depreciation – sometimes depreciation is included in cost of sales types of accounts depending on the nature of the business.Professional Fees – legal, outside accounting, consulting.Utilities – water, sewer, electricity, gas (sometimes theses expenses are included with facilities).Office – supplies, office technology, software.Communications – phone, cell phones, internet, radio, GPS systems.Transportation – often this expense is a function of cost of sales.I nsurance – general liability, auto, property, umbrella etc. ![]() The second most expensive line item with expenses is facility costs. Facility costs comprise rent, maintenance, real estate taxes and others. Other forms of expenses include: In addition, the front office administration costs are also included, even the wages paid to the bookkeeper. This is referring to their compensation which includes salaries, benefits, payroll taxes etc. ![]() In more than 90% of all business operations, the most expensive overhead item is the cost of the management team. The following is a short list of the different names used to say expense accounts: In general, only debits are entered in expense types of accounts.īefore delving into the debits and credits for expense accounts, there is some accounting terminology to understand. Terminology related to expense types of accounts. There are several different terms used to describe this section of the income statement (profit and loss statement). Bookkeeping – Debits and Credits in Expense Accounts (Lesson 8)Įxpense accounts rarely have credit entries posted to them.Įxpense types of accounts are the easiest to understand with bookkeeping.
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