There are lots of expenses in every type of business. All are recording in the books of accounts through journal entries. After passing journal entries, each expense account is prepared in ledger accounts. To record debits and credits of each expense account is important.
1. Debits of Expense Account
All Expense accounts’ debit side, we will show the amount of expenses. If we pay cash expenses, we will debit cash account in the expense account. For example, we have paid cash for insurance premium Rs. 1000, for rent Rs. 10,000, for electricity bill Rs. 6000. In Insurance expense account, we will show Rs. 1000 in its debit side with cash account. In Rent account, we will show Rs. 10000 in its debit side with cash account. In Electricity Expense Account, we will show Rs. 6000 in its debit side with cash account. If we pay same expenses end of every month, we will show same amount in the debit side in respective expense account.
2. Credits of Expense Account
In the end of year, we close each expense account and in the credit side, we show profit and loss account for transferring total one spent money in any expense to profit and loss account. In above example, if end of year total debit side of insurance expense account is showing Rs. 12000, we will transfer this Rs. 12000 to profit and loss account by showing Rs. 12000 in its credit side. Like this we will show profit and loss account in the credit side of all other expenses accounts.
1. Debits of Expense Account
All Expense accounts’ debit side, we will show the amount of expenses. If we pay cash expenses, we will debit cash account in the expense account. For example, we have paid cash for insurance premium Rs. 1000, for rent Rs. 10,000, for electricity bill Rs. 6000. In Insurance expense account, we will show Rs. 1000 in its debit side with cash account. In Rent account, we will show Rs. 10000 in its debit side with cash account. In Electricity Expense Account, we will show Rs. 6000 in its debit side with cash account. If we pay same expenses end of every month, we will show same amount in the debit side in respective expense account.
2. Credits of Expense Account
In the end of year, we close each expense account and in the credit side, we show profit and loss account for transferring total one spent money in any expense to profit and loss account. In above example, if end of year total debit side of insurance expense account is showing Rs. 12000, we will transfer this Rs. 12000 to profit and loss account by showing Rs. 12000 in its credit side. Like this we will show profit and loss account in the credit side of all other expenses accounts.
No comments:
Post a Comment