Expenses are debit entries in accounting. When you incur an expense, you record it by debiting the expense account, which increases the expense balance. This follows the fundamental accounting equation and the standard chart of accounts structure.
In double-entry bookkeeping, every transaction requires both a debit and a credit. When you debit an expense account, you must credit another account—typically cash or accounts payable—to keep the equation balanced. For example, if your business pays $500 for office supplies, you debit the supplies expense account for $500 and credit cash for $500.
Expense accounts have a natural debit balance, meaning they accumulate through debits rather than credits. This is because expenses represent money flowing out of the business, reducing equity. At the end of an accounting period, expense accounts are closed to determine net income or net loss. If total debits (expenses) exceed total credits (revenues), the business has a loss; if credits exceed debits, it has a profit.
Understanding the debit/credit nature of expenses is essential for maintaining accurate financial records and preparing reliable financial statements like income statements and balance sheets. This foundational principle applies across all business types and accounting systems.