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Learning the format
Scenario: On March 1st, you purchase a new lemon squeezer for your lemonade stand with cash for $1,000.
"This journal entry contains a debit to Equipment of $1,000 and a credit to Cash of $1,000."
Write it on your own!
Scenario: On March 1st, you purchase a new lemon squeezer for your lemonade stand with cash for $1,000.
The blue underlined text signals...
- We're purchasing a new lemon squeezer. ➡️ This will be represented with the Equipment account.
- We're purchasing this with cash. ➡️ We will use the Cash account.
The reason is...
- We're obtaining (+) a new lemon squeezer.
- This is represented through Equipment.
- Which is an asset account, and therefore has a normal debit balance.
- So, to increase it by $1,000, we'll debit it.
The reason is...
- We're spending (-) cash to pay for the lemon squeezer.
- This is represented through Cash.
- Which is an asset account, and therefore has a normal debit balance.
- So, to decrease it by $1,000, we'll credit it.
