Explanation 1 (DEALER): The $1000 investment causes owner’s equity to increase and owner’s equity is an equity account (a normal credit account), so the entry is a credit. Is the entry to the company’s owner’s equity account a debit or a credit? The owner of a car wash provides their company with a $1,000 initial investment. Explanation: The $1000 investment causes cash to increase and cash is an asset (a normal debit account), so the entry is a debit. Is the entry to the company’s cash account a debit or a credit? Purchase assets, like a laptop to work on (Assets). Pay the business’s bills like rent or employee salaries (Expenses). Distribute it back to the owners (Dividend). And, there are only three places that the business could spend that cash back to (IE Destination):. Business earned it by selling a product or service (Revenue). Owner invested into business from his/her own pocket (Equity). Borrowed from a third-party like a bank (Liabilities). If a business holds some cash, broadly speaking, there are only 3 possible places that cash could come from (IE Source):. Debits represent the Destinations that economic benefit can flow to. Credits represent the Sources that economic benefit can flow from. “Every financial transaction involves a flow of economic benefit from a source to a destination”. True meaning of debits and credits in accounting:. Credits increase these balances, and Debits decrease them. 
Credit accounts: Liabilities, Equity, Revenue.Debits increase these balances, Credits decrease them.Debit accounts: Dividends, Expenses, Assets.DEALER is the “Number 1 accounting hack” for accounting, according to the Accounting Stuff YouTube video.These videos were created by the excellent Accounting Stuff YouTube channel.
These notes were taken based on this 3-minute YouTube video called DEALER: The Number 1 HACK for Debits & Credits and this 7 minute video called 5 Debit and Credit Practice Questions & Solutions.
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