Table of Contents

Red Ink: What it Means, How it Works, History

By

澳洲幸运5官方开奖结果体彩网:Daniel Liberto

Updated July 02, 2023

Reviewed by Margaret James

Fact checked by

Jared Ecker

Definition

"Red ink" is financial jargon that describes the color of accounting entries that describe a financial loss.

What Does the Term "Red Ink" Mean?

"Red ink" is business jargon describing a financial loss, withdrawal, or debt. When accountants made physical entries into a general ledger, red ink was used to show a negative number, and black ink was used to show that a number was positive or profitable.

Key Takeaways

"Red ink" is financial jargon describing the coloring of accounting entries that denote losses or negative outcomes.
When accountants made physical entries into a paper general ledger, red ink was used to show a negative number, and black ink to show that a number was positive or profitable.
That custom paved the way for the term "in the red," which can be applied to any company or individual with a negative balance.

History of the Term "Red Ink"

The negative connotations of red in finance are generally attributed to the old custom of accountants opting to use the color to denote losses. When company books were maintained bꦜy hand, red and black ink were convenient methods to call attention to the entries su♒btracting or adding value. Red, it just so happens, signified a subtraction or a loss.

That habit has lived on. Today, most financial and operational ledgers are maintained electronically, using parentheses around losses or negative entries. However, it is not uncommon for some programs to use red and black coloring to highlight losses and gains.

Important

A red entry doesn't always mean a loss was taken. It was also used to signify a withdrawal or expense in a ledger or journal.

Why the Color Red Was Used

In many cultures, colors can function as a symbol of feelings and emoꦓtions. Some evoke calm ☂and tranquillity, while others are more loud and powerful.

Red falls under the latter category and i🀅s said to signify everything from energy, passion, and sexuality to aggression, danger, violence, and war. Some of these associations can be described as positive and others negative, yet in financial circles, any mention or use of this particular color almost always means🤡 something bad.

Red ink is synonymous with the business expressions "bleeding red ink" or "in the red." When red is used with numbers, it generally indicates that a company, government, or other entity is spend🉐ing money or using more than it brings in. An indꦐividual with more liabilities than assets who cannot pay off debts can also be in the red.

Red is often used in business to indicate that something unwanted is happening, too. For example, regulations governing companies are regularly referred to negatively as red tape. Investors may also refer to a falling 澳洲幸运5官方开奖结果体彩网:share price or the 澳洲幸运5官方开奖结果体彩网:stock market as being in the red.

Special Considerations

A company with red ink featured heavily in its accounts may not necessarily be doomed. A lack of 澳洲幸运5官方开奖结果体彩网:profitability might be a temporary issue linked to necessary expenditure on research, new technology, or to pay off debt.

These expenses make its 澳洲幸运5官方开奖结果体彩网:financial statements look ugly. However, they can strengthen the company and its ability to make money over the longer term. The line may be drawn when a company is consistently in the red. Persistent losses could lead it to lose 澳洲幸运5官方开奖结果体彩网:shareholders, fail to attract new ones, struggle to secure any 澳洲幸运5官方开奖结果体彩网:financing, finally ending in bankruptcy.

Why Do We Say "In the Red"?

It is commonly believed that "in the red" stems from accountants using red ink in physical accounting ledgers and journals to signify withdrawals, negative entries, or debts.

What's the Meaning of "In the Black"?

Businesses, governments, and people commonly use the phrase "in the black" to refer to a positive fund balance in their accounts.

What Does It Mean to "Fall Into the Red"?

The phrase "fall into the red" is generally used to refer to moving from a positive account balance to a negative account balance or into debt.

The Bottom Line

In financial terms, red ink means a debt or negative account balance. It is a term used by people, governments, and businesses. It is generally thought to derive from entries in paper accounting journals and ledgers where black and red ink were used to signify positive and negative account activity.

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