Why expenses are debited and incomesare credited...

[Abu Baker]

y expenses r debited and incomes r credited...? urgent

[Raz]

Originally Posted by Abu Baker

y expenses r debited and incomes r credited...? urgent

Expense and income accounts are nominal accounts. Nominal accounts are debited when they increase the equity/capital side of balance sheet. Nominal accounts are credited when they increase the equity/capital side of the balance sheet.

Increase in expenses will ultimately result in the reduced profits. Reduced profits will fetch lesser addition in the equity/capital side.

Increase in income will ultimately result in the increased profits. Enhanced profits will fetch larger addition in the equity/capital side.


Based on these concepts increase in expense account is recorded through debit entry (because expense is a nominal account and increase in expense will reduce the balance of equity/capital side) and increase in income account is recorded through credit entry (because income is a nominal account and increase in income will increase the balance of equity/capital side).



Regards

[Abu Baker]

thnx sir...
sir ye ans btye ga thk h kisi ne kaha h...
debit means which shows expenses and credit means which shows incomes aur expenses ka normal balance debit hota h incomes ka normal balance credit hota h... aur ye accounts par depend karta hai nominal account(debit all expenses and credit all incomes) personal account , real account (debit what comes in and credit what goes out)...
aur thora sa simple ans cramming k liye...
word AEDLIC means A:assets E:expenses D:drawings L:liability I:income C:capital
AED and LIC
D means debit when increases
C means credit when increases

[Ain Ullah]

The rule is, when there is decrease in owner's equity it is recorded by debits
and when there is increase in owner's equity it is recorded by credits.

Case 1: Expenses decreases owner's equity hence recorded by debits
Case 2: Income increases owner's equity hence recorded by credits