When are expenses credited?

Definition of Expenses Credited

Normally, the general ledger accounts for expenses are debited and are expected to have debit balances. The reason they are debited is they cause the normal credit balance of stockholders' (owner's) equity to decrease.

However, there are occasions when the general ledger expense accounts will be credited.

Examples of Expenses being Credited

Below are some examples of when general ledger expense accounts are credited:

  • When recording closing entries to transfer the end-of-the-year balances in the revenue, expense, and other temporary accounts to a balance sheet account such as a corporation's Retained Earnings account
  • When recording a reversing entry for a previous accrual adjusting entry involving an expense
  • When recording a deferral adjusting entry that delays (until a later accounting period) some of the amount now included in an expense account
  • When recording a correcting entry to reclassify an amount from the incorrect expense account to the correct account