What are journal entry of expenses and income in accounting ?
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ToggleWhat is a journal entry of expense and income in accounting?
What is an expense in accounting?
An expense in accounting is the money spent, or costs incurred, by a business in its effort to generate profit. Essentially, accounts expenses represent the cost of doing business; they are the sum of all the activities that hopefully generate a profit.
It is important to understand the difference between “cost” and “expense” since they each have a distinct meaning in accounting. Cost is the monetary measure (cash) that has been given up in order to buy an asset. An expense is a cost that has expired or been taken up by activities that help generate revenue. Therefore, all expenses are costs, but not all costs are expenses.
Some examples of expenses
- Office stationery
- Salary
- Rent
- Petrol expense
- Commission paid
- Bill expense A/c
- Conveyance expense
- Traveling expense
Expense is nominal in nature as per nominal account Dr all Expenses and Losses, therefore, the expense is Debited in the books of Accounts
Nominal Accounts |
Dr. All Expenses and Losses |
Cr. All Income and gains |
Journal entry of Expense
Rent paid for the month Rs 10,000
Rent is nominal accounts by nature and in this entry, rent is paid therefore it is expense and as per expense, we have to debit expense accounts.
Journal entry for the same will be
Rent a/c
To Cash A/c
(being rent paid)
Journal entry of travelling expense
Travelling means moving from one city to other city for business purpose hence if we do any such activities that will comes under the expense for business therefore written in
Example Ram goes to Delhi and provide a bill of Rs 5000 hotel charges and Rs 500 for meal.
Particular | Amount |
Travelling expense | 5500 |
To Cash A/c (being travelling exp made) | 5500
|
What is Income in Accounting?
Accounting income is the profit a company retains after paying off all its relevant expenses from sales revenue earned.
It is synonymous with net income. While it is arrived at through, which is most often found at the end of the income statement or profit and loss Accounts.
Journal entry of Income .
Cash A/c Dr. xxxx
to Sales A/c xxxx
(being goods sold for cash )
Sales is nominal accounts its income by nature therefore we credit sales accounts in books of accounts.
Sales can also be considered as Real accounts as goods can be felt and touch.
they are shown in the credit side of Profit and loss accounts.
Difference between Expense and Income
Expense Accounts | Income Accounts |
An expense in accounting is the money spent, or costs incurred, by a business in its effort to generate profit | Accounting income is the profit a company retains after paying off all its relevant expenses from sales revenue earned. |
Expense is shown on the Debit side of the profit and loss account or income statement | Income are shown in the credit side of the Profit and loss account or income statement |