> If you spend $X on sheep, you credit $X where? Debit it from where?
You debit your 'sheep' account (maybe called sth like inventory) and you credit your cash account, or a liabilities towards suppliers account. Your equity stays constant in either case (no profit or loss impact), if you paid cash you've swapped X worth of cash for X worth of sheep, otherwise your liabilities went up by X.
When they die, you debit some kind of expense account (extraordinary losses or sth like that), and you credit the sheep account. In that case, you've made a loss of X and your equity (when you next draw up your balance sheet) will be lower by X (assuming that's the only business case). It might even go negative, eg if the sheep were your only asset and you still have the liability towards the guy who sold them to you.
It still feels exactly the opposite of what I thought a credit and debit were. Surely when you add sheep, you credit the sheep account and debit the cash.
Yeah, best not to think of any semantics wrt to the words debit and credit. Debit is left-hand side, credit is right-hand side, and just remember the rules how they work :)
Haha that sounds like shut-up-and-calculate to me. The alternative is to update the rules to use our intuition on whether the action we’re tracking is good or bad for us and map that to increasing or decreasing balances that represent what we own, owe, earn and spend.
You debit your 'sheep' account (maybe called sth like inventory) and you credit your cash account, or a liabilities towards suppliers account. Your equity stays constant in either case (no profit or loss impact), if you paid cash you've swapped X worth of cash for X worth of sheep, otherwise your liabilities went up by X.
When they die, you debit some kind of expense account (extraordinary losses or sth like that), and you credit the sheep account. In that case, you've made a loss of X and your equity (when you next draw up your balance sheet) will be lower by X (assuming that's the only business case). It might even go negative, eg if the sheep were your only asset and you still have the liability towards the guy who sold them to you.