I'm still mixed up. Why is debting equity sad? I thought equity in a company is good. Also I though income would be good, and debiting income would be increasing it, therefore...good? I understand that Assets = Liabilities + Equity, so I'm thinking basically Assets = Equity. On the light board it looks like Assets are happy and Equity is sad. ???? I'm sorry I'm a slow learning on this.
This presentation is about the debit or credit entries and balances on the General Ledger. Therefore Equity increases with a Credit entry on the General Ledger; it should have a Credit balance.
Just as Income increases with a Credit entry and we want the Income to be more than the total Expenses.
Though the Liability and Equity accounts show as "postive" on the Balance Sheet they are Credit balances on the General Ledger. If the Balance Sheet shows a negative number in a Liability or Equity account it has a debit balance on the General Ledger.
A net loss on the Income Statement is a Debit (a reduction) to the Equity.
Not sure you will still get this reply after the video...
Since Equity is a credit balance, debits decrease the Equity balance. When a debit decreases Equity that is bad for the business and makes it "sad."
I'm with you, Holly. Not sure the faces helped me understand ...
Haha, I thought I was doing ok with this but after watching the smilies I got a little mixed up. Our logic works in different ways. :)