Why Does Expenses Debit and Incomes Always Credit in Accounting Journal Entries?



In accounting journal entries, If you just remember the rule of double entry  that all the expenses are debit and all the expenses are credit. This is not ok answer because you just remember it. It is just eating anything on the road and you are saying that

It is rule that we have to eat anything when we are hungry.

No no my dear.

No

First : Why Does Expenses Always Debit  in Accounting Journal Entries


Every rule has a very interesting and truthful story.

So, learn this story with simple Example

All expenses are two types

One type # you will bought the product and you spend the money, it is your expenses

Second type # you will bought the service and you spend the money, it is your expenses.

One type is visible and you can say

Buying of any product is increase your asset, So, it must be debit in accounting journal entry.

But again I say, why asset or increase in the asset debits in accounting journal entry.

because it is the part of your business's ownership, you will have the legal right to sell it for your business or use it for own purpose. So, it is coming in your right and it increases your self confidence, so it will debit.


Second type is invisible. When I did not see the product. How will it my asset or increase in my asset and why should I debit it. This is also again a very interesting question

You take the air and live the life. Air is invisible but it does not mean that it is not asset for your life.

You had paid your electricity bill, you have used the electricity for your business. You need it for operating your machine which clean your diamond and then you sell same diamond at high profit. So, this service's value is your asset. You have bought this invisible product by paying your cash and same cash will decrease your asset and it will credit in accounting journal entries

Second : Why Does Incomes Always Credit  in Accounting Journal Entries 

For getting income, you sell your time for job. Is it not true. Do you not believe that your given time is your biggest asset of your life. And you got salary money. You say it with confidence that I earned Rs. 1 Lakh per month. It means, you have sold Rs. 1 Lakh asset per month. Every month, Rs. 1 Lakh valued time, you are selling to your company where you are doing the job.

So earned salary account will credit. But company does not do injustice with you. Company has given you Rs. 1 Lakh which is your current asset and compensated your time.

Except this, if you sold an physical asset like furniture, you can see this decrease of asset from your business and it will credit and you get sale amount which is your current asset in the form of  in your bank balance. So, received sale amount in bank will be debit in your accounting journal entries.


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Krantikari Blog: Why Does Expenses Debit and Incomes Always Credit in Accounting Journal Entries?
Why Does Expenses Debit and Incomes Always Credit in Accounting Journal Entries?
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