Journal Entries

You'll see debit transactions completely left-aligned and at the top of the journal entry...

...whereas credit transactions will have an indent and are at the bottom of the journal entry.

In a journal entry, debits will be completely left-aligned and at the top, whereas credits will be indented and at the bottom.

In terms of the amounts for these debits and credits, we can see the debit amounts in the 2nd column...

...and credit amounts in the 3rd column.

If we wanted to read this journal entry verbally, we'd say that it "contains a debit to Equipment of $1,000...

...and a credit to Cash of $1,000."

This immediately tells me that we're going to be increasing our Equipment account. Why? Because we're obtaining a lemon squeezer, which is a long term asset used to create our product (lemonade).

Therefore, since we're increasing our Equipment account (which is an asset) this means that we'll debit it. (See the normal balance table below.)

Remember: all assets have a normal debit balance, therefore debiting them increases them! Therefore, we'll place Equipment into our journal entry like so:

If we're making the payment for this lemon squeezer with cash, that's going to impact our Cash account. How so? It'll decrease that account, since we're paying cash out of our balance.

Since Cash is an asset account that means we must credit it. (See the normal balance table below.)

Remember: assets have a normal debit balance, therefore crediting them decreases them! So, we'll place Cash in our journal entry like so:

This phrase makes things clear in terms of dollar amount. The lemon squeezer (Equipment) has a value of $1,000, therefore we're going to be debiting Equipment by $1,000.

In addition, the lemon squeezer cost us $1,000 in cash. Therefore, we're going to be crediting Cash by $1,000.