Maybe the following will help. It might not click immediately but, when it does, there will no longer be any need to memorize what debits/credits are in the context of each of assets/liabilities/equity.
Think of "shareholder's equity" aka "owner's equity" as being a liability. After all, doesn't a company owe all its earnings to its owners?
Now, consider that:
- all income is a liability owed to shareholders. So any new income is an increase in the amount owed to these shareholder 'creditors', represented by a credit entry
- similar but opposite reasoning says that a new expense is represented by debit entry
If you feel uncomfortable seeing shareholders in the same category as creditors, consider that companies can choose two ways to fund themselves: equity (which creates shareholders) or debt (which creates creditors).
Think of "shareholder's equity" aka "owner's equity" as being a liability. After all, doesn't a company owe all its earnings to its owners?
Now, consider that:
- all income is a liability owed to shareholders. So any new income is an increase in the amount owed to these shareholder 'creditors', represented by a credit entry
- similar but opposite reasoning says that a new expense is represented by debit entry
If you feel uncomfortable seeing shareholders in the same category as creditors, consider that companies can choose two ways to fund themselves: equity (which creates shareholders) or debt (which creates creditors).