Accounting Tutorial

4. Setup Income and Expense Accounts

Using the Trial Balance, the Income Statement consists of:
Income and Expense Accounts

At this time you make decisions about numbering the accounts. Plan the numbers well. Allow at least 10 between accounts to allow for inserting new accounts and grouping accounts which relate to each other.

Account Numbering

 Numbering  Account Type  Normal Balance
 400’s or 4000’s  Income  Credit (CR)
 500+’s or 5000+’s  Expense  Debit (DR)

Setting up Account Numbers - Sample

Note at the beginning of an accounting cycle Income and Expense account balances are zero.

 Number  Account  DR  CR
 4000  Sales    0.00
 5000  Cost of Goods Sold  0.00  
 5100  Rent Expense  0.00  
 5200  Phone Expense  0.00  
 5300  Shipping Expense  0.00  
   Totals DR/CR  0.00  0.00