Journalizing Expenses

Journalizing Expenses

Expense Accounts

• Operating expenses: Expenses related to the primary operations. Examples
• Salaries expense: Wages and salaries earned by employees
• Rent expense: Fees paid for renting real estate, equipment and other assets.
• Marketing and Advertising expense: Fees paid for advertising, marketing and other promotional services.
• Depreciation expense: Expenses related to the use of long-term assets like buildings, equipment, machinery
• Non-operating expenses: Expenses incurred from non-operating or secondary activities. Examples
• Interest expense: Interest incurred on borrowings from loans, notes and other liabilities with interest.
• Income tax expense: Income taxes incurred on the company's profits.
• Losses: Losses from the sale of long-term assets, settlement of liabilities, and other non-operating activities.

• Should be recorded when expenses are incurred (used), not when they are paid.
• When expense is incurred, the expense account increases (debit).
• Credit account depends on situation.

Example: Journalizing Expenses

1. Received the monthly utility bill from Hydro Corp., the bill totalled $500 and will be paid next month.

1. Paid employees their weekly salaries totalling $6,000

1. Used a month of rent that had been prepaid at the beginning of the year at a cost of $1,200 per month.

1. Incurred $500 of interest on a loan, the interest will be paid at maturity.

1. Paid $6,000 for a three year insurance plan. Coverage begins next month.