Can you credit an expense

For Dividends, it would be an equity account but have a normal DEBIT balance meaning, debit will increase and credit will decrease. We learned that net income is added to equity. We also learned that net income is revenues — expenses and calculated on the income statement. The recording rules for revenues and expenses are:. The reasoning behind this rule is that revenues increase retained earnings, and increases in retained earnings are recorded on the right side.

Expenses decrease retained earnings, and decreases in retained earnings are recorded on the left side. Remember, any account can have both debits and credits. Here is another summary chart of each account type and the normal balances.

Regardless of what elements are present in the business transaction, a journal entry will always have AT least one debit and one credit. Skip to main content. Chapter 2: The Accounting Cycle.

Depending on the account in question, debiting it can cause the number you see to increase or decrease. And the same is true for credits. To fully understand debits and credits, you first need to understand the concept of double-entry accounting.

So every time you make money or spend money, just remember that at least one account will be debited and one will be credited. And this happens for every single transaction which is part of why bookkeeping can be time-consuming. To recap: Debits generally happen when things are added to accounts.

Credits happen when things are subtracted. Seems fairly simple right? The tricky part in understanding these two categorizations is that both debits and credits have different impacts across different types of accounts.

For example, what happens if you debit an account that shows how much you owe to someone else? Is it the same as debiting an account that shows how much you were just paid? The answer lies in what kind of balance the account in question normally holds.

Does it hold a debit balance normally? Or does it hold a credit balance? And the accounts that normally have a debit balance deal with assets and expenses. Looking at the chart above we can tell that assets of which cash is a part will increase by debiting it. Join our mailing list to receive free bookkeeping and tax tips, news and offers from FreeAgent you can unsubscribe at any time. You must have Javascript enabled to submit this form. We are committed to keeping your information safe. Read our Privacy Policy to find out more.

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