Expense Account Type

An Expense account will typically have a debit balance. Expense accounts accumulate the amounts paid by the company to be able to provide goods or services to its customers.

At the end of the year the Expense accounts are cleared to Retained Earnings and start out the beginning of the new year with a balance of zero. During the year the Expense accounts would have a balance made up of the accumulated activity to date. For example...

If your accounting year starts on January 1, and you have Repairs and Maintenance expense of exactly $6,000 every month, your account balance in the General Ledger on March 31 will be $18,000. Your account balance in the General Ledger on September 30 will be $54,000. The General Ledger balance is the accumulation of the activity-to-date.

Expense accounts that you might want keep track of with RecWizard include the following:

• You can identify what lawyers you have used during the year and what litigation may need to be reviewed by your accountant in auditing your books by using a Legal Expense reconciliation.
• If you want to avoid customers that did not pay you in the past, keep track of them in the Bad Debt Expense account.
• Repairs and Maintenance Greater Than $10,000 (or whatever limit your accountant or manager wants to see) – to identify significant expenditures that may not be recurring in your normal operations.

NOTE: The reason it is important to classify an account as an Expense account for RecWizard purposes is that the “normal balance” will always be a debit.