Journal Entry Rules for Expenses

Journal Entry Rules for Expenses

In this article we would discuss the journal entry rule for expenses. The rule for recording the journal entry for expense is very simple i.e. increase in expense is debited and decrease in expense is credited. We can see that actually there are two rules for recording the expense i.e. one for increase and other for decrease of expense.

Journal Entry Rule for Increase in Expenses

When we incur an expense, it means that there is an increase in expense, so the expense is debited according to expense recording rule (increase in expense is debited). This rule can be explained with a simple example .For example we pay salary to an employee amounting 10,000, this transaction shall be recorded as under.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Salary		10,000
01-01-2017	Cash			10,000

The salary is being debited as there is an increase an expense and cash is being credited under the asset rules for recording the journal entry (decrease in asset is credited).Rules for recording the assets would be explained in my other article.

Journal Entry Rule for Decrease in Expenses

A decrease in expense is credited according to expense recording rules. For example we wrongly recorded the salary of PKR 12,000 instead of 10,000, now we have to reduce/decrease our expense to make the correction. We would make this correction by following Journal entry;

Expense would be credited as there is a decrease an expense of PKR 2,000 (actual expense was 10,000 instead 12,000) and cash would be debited according to assets rules for recording the journal entry ( increase in asset is debit).

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Cash		2,000
01-01-2017	Salary			2,000

Examples of Recording Journal Entries

Journal entries rules for recording the expenses have been explained with some simple examples.

1.    Rent paid through bank amounting 20,000.

2.    Insurance paid in Cash 5,000.

3.    Repair paid through cash was wrongly recorded by PKR 1000.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Rent		20,000
01-01-2017	Bank			20,000

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Insurance		5,000
01-01-2017	Cash			5,000

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Cash		2,000
01-01-2017	Salary			2,000