Expense Journal Entries

Journal Entry for Expenses

Expenses mean the cost of assets or services enjoyed. Expense Journal entries are the critical accounting entries that reflect the expenditures incurred by the entity. Journal entries are the base of accounting. All journal entries construct financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more and help in financial analysis and decision-making.

Expense Journal entry forms a significant part of:

  1. Capital expenditureCapital ExpenditureCapex or Capital Expenditure is the expense of the company's total purchases of assets during a given period determined by adding the net increase in factory, property, equipment, and depreciation expense during a fiscal year.read more ( Balance Sheet Items)
  2. Revenue Expenditure( Profit and Loss statement items)
  3. Provisions( Both, Balance sheet and Profit and Loss statement items)
  4. Deferred revenue expendituresDeferred Revenue ExpendituresDeferred revenue expenditure is the expenditure incurred in current accounting period but is realized in later accounting periods. This expenditure might be written off in the same financial year or over a period of a few years.read more ( Both, Balance sheet and Profit and Loss statement items)
  5. Amortization of Assets ( Profit and Loss statement items)
  6. Amortization of Liabilities( Profit and Loss statement items)

Let us take some examples of journal entries of expenses.

Examples of Expense Journal Entries

Below are the examples of journal entry for Expense.

Example #1 – Basic Expenses

Pass journal entry for following expenses in the books of XYZ limited for the year 2018:

Sr No Expense Description
1 The bad debtBad DebtBad Debts can be described as unforeseen loss incurred by a business organization on account of non-fulfillment of agreed terms and conditions on account of sale of goods or services or repayment of any loan or other obligation.read more of $ 46000 writes off due to the bankruptcy of debtor Ron Enterprise.
2 Salary @ $3000 for ten employees is still outstanding at the end of the year.
3 The insurance premium paid in 2012 of $ 20,000 for ten years; Recognize this year’s accrued portion.
4 Paid commission @1% of the turnover of $ 1,000,000 to the sales head;
5 Paid Office expenses of $ 10,000;

Solution

Journal Entries in the books of ABC limited

Expense journal entry Example 1-1

Expense journal entry Example 1-2

Expense journal entry Example 1-3

Expense journal entry Example 1-4

Expense journal entry Example 1-5

Example #2 – Miscellaneous Expenses

Pass the journal entries for following expenses in the books of ABC Limited for the year 2018-19:

Sr No Expense Description
1 Salary paid to staff worth $ 50,000.
2 Paid Rent of plot to the owner of $ 15,000;
3 Paid insurance premiums of Key personnel @ 1000 for five employees;
4 The paid sundry expenseSundry ExpenseSundry or miscellaneous expenses are the costs incurred by the company during an accounting period under consideration which is generally of a small value and is not as significant to be mentioned individually in the separate ledger account and are thus clubbed together under one head.read more of $ 8500;
5 Purchased Stationery worth $ 400.
6 Bought Furniture of $ 14000.
7 Write offWrite OffWrite off is the reduction in the value of the assets that were present in the books of accounts of the company on a particular period of time and are recorded as the accounting expense against the payment not received or the losses on the assets.read more debtor worth $ 4500 out of $ 45000 due to weak business conditions.
8 Depreciation charged on Building @ 10$, worth $ 100,000.
9 Pre-Paid maintenance of the building association of $ 50,000 for ten years;
10 A penalty of $ 3200 is still outstanding at the end of the year. However, the accountant is of opinion to keep the provision of the same and recognize it.

Solution

Journal Entries in the books of ABC limited

Expense journal entry Example 2-1

Expense journal entry Example 2-2

Expense journal entry Example 2-3

Expense journal entry Example 2-4

Expense journal entry Example 2-5

EJE Example 2-6

EJE Example 2-7

EJE Example 2-8

EJE Example 2-9

EJE Example 2-10

Points to be Considered

The following are the important points while passing the journal entry.

Conclusion

Thus, an expense journal entry is of utmost importance, as the same will directly reduce the revenue of the company. Moreover, an expense is also of much importance, as this can be used to incorporate the fraudulent transaction and to window dress the financials. Hence, it is needed to be monitored diligently and needs to be reviewed periodically to ensure authenticity.

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This has been a guide to Expense Journal Entries. Here we discuss the most common examples of Journal entry for Expenses along with detailed explanations. Here are the other articles in accounting that you may like –

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