Debits and credits in action
Maya's studio has three events this week: it buys a $1,200 computer with cash; it pays $800 rent; it bills a client $2,000 for finished work. Record each — and watch the rules, not your instincts.
The journal entry
Buy a $1,200 computer with cash
| Account | Debit | Credit |
|---|---|---|
| Equipment | $1,200 | |
| Cash | $1,200 |
- Equipment (debit): Equipment is an asset arriving — assets grow with debits.
- Cash (credit): Cash is an asset leaving — assets shrink with credits.
Remember this
- formula
The whole rulebook: Assets & Expenses grow with DEBITS. Liabilities, Equity & Revenues grow with CREDITS. Shrinking = the opposite side. Every entry: debits = credits.
- mnemonic
Ask two questions per line: WHICH family is this account? and did it GROW or SHRINK? The rules do the rest — instincts about 'debit sounds negative' will only betray you.