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>"Income numbers are negative, and Expenses numbers are positive. So if you earned more than you spent (a good outcome), the final sum of Income + Expenses bala
by victor106 6y ago
>"Income numbers are negative, and Expenses numbers are positive. So if you earned more than you spent (a good outcome), the final sum of Income + Expenses balances will be a negative number"
This is kind of counter intuitive. You would think of income as being positive and expenses being negative. This is why accounting trips me up.
- nybble41 6y agoThe problem is that you're thinking of "income" as "the amount of money I received". That would, of course, always be a positive number. Income accounts actually represent the source of income, such as a customer or employer; you received money from somewhere, and so the balance of that source has decreased, while your own assets have increased. Expenses are just the opposite: a negative entry in your asset account, counterbalanced by a positive entry in the expense account representing the recipient of the money. Your loss is their gain. You could flip it around but then your own asset accounts would have negative balances. Or you could do what some accounting systems do and selectively negate the balances for credits and debits depending on the type of account, but that's just confusing all around.