BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Assets and expenses have natural debit balances. This means that positive values for assets and expenses are debited and negative balances are credited.

Detailed explanation-2: -Definition of expense accounts A debit to an expense account means the business has spent more money on a cost (i.e. increases the expense), and a credit to a liability account means the business has had a cost refunded or reduced (i.e. reduces the expense).

Detailed explanation-3: -Accounts that normally have a debit balance include assets, expenses, and losses. Examples of these accounts are the cash, accounts receivable, prepaid expenses, fixed assets (asset) account, wages (expense) and loss on sale of assets (loss) account.

Detailed explanation-4: -Debits increase asset or expense accounts and decrease liability, revenue or equity accounts. Credits do the reverse.

Detailed explanation-5: -Generally, income will always be a CREDIT and expenses will always be a DEBIT – unless you are issuing or receiving a credit note to reduce income or expenses. Let’s look at some examples of typical business transactions and how they might impact your accounts.