What Does A Positive Or A Negative Sign Mean In Accounting
A Positive (Plus or +) or Negative (Minus or -) mean that there is an increase in an Account or a decrease in an account. In other words, if there is a debit or credit favourable side for an account, then the amount of such account will be increased and if there
is a debit or credit unfavourable side for an account, then the amount of such account will be decreased.
Positive Sign shows that we add two or more debit amounts or two more credit amounts of Different Types of Accounts in a ledger account while negative sign shows we subtract two or more debit and credit amounts of different types of accounts.
For example, the positive side for an Asset Account is debit, so when we add some debit amount in it , then, the resulted amount will increase the balance on debit side and it shows a positive sign in asset. It means
that the amount is positive and also it will surely increase the value of asset on Balance Sheet.
Example:-
Rs.
Sales 200000
Cost of Sales (80000)
________
Gross Profit 120000
Revenues 200000
Expenses (70000)
________
Net Income 250000
________
________
From the above sample of Income Statement, we subtract or minus the amount of Sales with the amount of Cost of Sales as sales is a direct revenue which always has credit amount and cost of sales is a direct expense which has debit amount. So credit plus debit amounts are always
subtracted and we get the amount of Gross Profit of Rs. 120000.
Similarly, we add other debit and credit amounts.
So, here are the following Rules applied in accounting with respect to add or subtract the two or more amounts whether these are debited and credited:
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