One accounting question

[champ_guru_24]

Hi,

Accounts of type Asset and Liability are examples where in they can be debited as well as credited. But I don?t see that this applies to accounts of type Revenue and Expense. Because whenever we sell services or products we get paid. So revenue account will be credited. But I see no scenario where in Revenue account will get debited. Whenever we spend money the expense account will get debited. Here also, I see no scenario where in expense account will ever get credited.
So should we assume that accounts of type revenue will never have a single debit? And account of type expense will never have a single credit?

I am working in payables and so may be I cannot think of any scenario as mentioned above. May be a person from receivables can throw some light on this.

Regards,
Abhay

[shaikjohnpasha]

Hi Abhay,

Q:Accounts of type Asset and Liability are examples where in they can be debited as well as credited.

A:This statement is not fully correct.An Asset always shows a debit balance and a Liability always shows a credit balance.May be you might have seen them contrary in a scenareo where in an asset is having Negative balance and vice versa.

Q:I see no scenario where in Revenue account will get debited. Whenever we spend money the expense account will get debited. Here also, I see no scenario where in expense account will ever get credited.

A:Here also again the same explination applies.For ex:If the Discount is received it should be credited as it a revenue in nature and if the discount is given,it should be debited as it is an expense in nature.If you have only one account(GLCC) for Discount (both for earned and given),you can see this account debit and credit with negative balances. for discount given OR Discount taken (any one only).

Hope this would help you.
Pls revert, if you feel any explaination needed in this regard.

Thanks and Regards,
John Pasha Shaik

[manpreet]

hi abhay,

if we have mentioned one value(expenditure or revenue) for discount in charts of accounts then we can see debit and credit.

if we defined for paying discount one value (expenditure) and another receiving discount (revenue) then you may not see debit and credit.

in the finacial closing year this account balances trf to profit and loss account.

next year you can't see opening balance for expenditure and revenue account but for asset and liability it will there.

if i am wrong please correct me

manpreet singh

[ramsabi]

Hi Abhay,

Say you have "Sales Account" and you have given it a Qualifier of "Revenue". Usually the account will have CREDITS. But what happens when there is a sales return?!! There will be a DEBIT to "Sales Account" which is of type "Revenue".
Similarly say you have a "Purchase Account" of type "Expense"(I am simplifying things by not having an inventory account in the middle). There will normally be only DEBITS to this account. But what happens if you return some goods to the vendor after having accounted the purchase? "Purchase Account" needs to be credited !!!

Hope the above answers your question.

[champ_guru_24]

ramsabi....Perfect answer!!!