Which Of The Following Statements Is Correct Regarding Expenses?

The correct statement about Expenses is (D), as these are increased on left side or debit side of their T-Account and when expenses incurred these are increasing on left side of T-account. As expenses are outflows for the business, as the cash is paid out and it is going out of the business which decrease the net profit, so these directly decrease the Equity Account. Examples of expenses include Rent paid, electricity bill paid, fees paid, salaries paid, etc. In T-account of expenses, we debit the expense account on left side and then the closing balance is calculated. In their T-account, debit side is higher than credit side and resulted is a debit balance which is finally closed to Income Summary Account as these are temporary accounts which are zero out at the end of the current accounting period.

The option (A) is incorrect as expenses are reported on the right side or liabilities & equity side of the Accounting Equation and these are deducted from equity. For example, if rent of $4,000 paid for the month, then $4,000 of rent exp. should be deducted from equity.

The option (B) is also a wrong choice as Revenues are resulted from products or services provided to customers. Revenues increase equity account as these are inflows for the business. For example, when products or services are performed for cash of $,5000, then the business earns the revenue for the accounting cycle which is added to equity. However, expenses are incurred for the purpose of earning revenues for the business during the accounting period.

The option (C) is also incorrect choice here as expense decrease equity although theses are incurred to earn revenues for the business during the accounting cycle. When these are incurred, equity decreases as now more expenses are ducted from revenues.