Making It Click: Real Examples
Let's see how this works in practice. When an owner invests ₱10,000 cash into their business, two things happen: Cash (an asset) increases, and Owner's Capital (equity) increases.
The journal entry looks like this: Debit Cash ₱10,000, Credit Owner's Capital ₱10,000. Why? Because assets increase with debits, and equity increases with credits.
Now try this: paying ₱2,000 for rent. Your Rent Expense goes up (expenses increase with debits), while your Cash goes down (assets decrease with credits). So you'd debit Rent Expense ₱2,000 and credit Cash ₱2,000.
Remember: Every transaction affects at least two accounts, and the accounting equation must always balance. Master this concept, and you'll handle any accounting problem with confidence.