When you pay expenses in cash, you need to record the decrease in cash and the recognition of the expense. In accounting, expenses are debited because they reduce equity, while cash is credited because it is an asset that is decreasing.
Journal Entry Example
Let's say your business paid ₹10,000 in cash for office supplies. The journal entry would be:
Date: [Current Date]
Particulars:
| Account Title | Debit (₹) | Credit (₹) |
|---|---|---|
| Office Supplies Expense | 10,000 | |
| Cash | 10,000 |
Explanation:
- Office Supplies Expense: This account is debited to record the expense incurred.
- Cash: This account is credited to reflect the outflow of cash.
