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I found it an interesting and useful explanation, but the bit in the middle where he just says "now categorize each node, I colored them in!" is the bit I alway

• rahimnathwani 5y ago
  Perhaps my explanation will help? In your chart of accounts, each account corresponds to exactly one of these: - Asset - Liability - Equity (changes in this affect the income statement) Whenever a transaction takes place, the debits and credits must sum up. For example, when you take a bank loan, your assets increase (debit) but your liabilities also increase (credit) by the same amount. Sometimes something touches more than two accounts. For example, if you sell a cup of coffee for $2, using up $0.50 worth of beans: CR Revenue $2 DR COGS $0.50 DR Cash $2 CR Materials $0.50 The first two lines increase the book value of the business by $1.50. The last two lines increase the assets of the business by $1.50 (cash up by $2, bean inventory down by $0.50). It's easy to get confused about debits and credits. I attempted to create a memorable explanation here: https://www.encona.com/posts/debits-and-credits https://www.encona.com/posts/debits-and-credits