The five buckets, a decision flow for picking the right account, and the 10 transactions a small business sees most.
Which account does this go to?
The five buckets
Every transaction in your books touches one or more of five account types. Memorize these five and you'll make the right call most of the time.
| Bucket | What's in it |
|---|---|
| Asset | Things you own that have value. Cash, AR, equipment. |
| Liability | Things you owe. AP, credit card balance, loans. |
| Equity | The owner's stake. Initial capital, retained earnings, owner draws. |
| Revenue | Money you earned by selling your product / service. |
| Expense | What it cost to run the business — rent, salaries, software. |
The decision flow
Ask yourself, in order:
- Did money come in from a customer? → Revenue (and the cash / AR side is an Asset).
- Did money go out to run the business? → Expense (and the cash / AP side is a Liability or Asset).
- Did the business receive a loan? → Liability (and the cash side is an Asset).
- Did the owner put money in? → Equity (and the cash side is an Asset).
- Did the owner take money out? → Equity (specifically Owner Draw) (and the cash side is an Asset).
- Did you buy something that lasts (equipment, property)? → Asset (and the cash side is a different Asset, or a Liability if financed).
The 10 transactions a small business sees most
| What happened | Debit | Credit |
|---|---|---|
| You made a sale (paid at point of sale) | Cash (Asset) | Revenue |
| You sent an invoice (paid later) | AR (Asset) | Revenue |
| Customer paid an invoice | Cash (Asset) | AR (Asset) |
| You paid a bill in cash | Expense | Cash (Asset) |
| You received a bill (not paid yet) | Expense | AP (Liability) |
| You paid down a bill | AP (Liability) | Cash (Asset) |
| Customer refund | Revenue (negative) | Cash (Asset) |
| You took a loan | Cash (Asset) | Loan Payable (Liability) |
| You took owner draw | Owner Draw (Equity) | Cash (Asset) |
| You put money into the business | Cash (Asset) | Owner Contribution (Equity) |
For the full account list your books seeded with, see Yoke Ledger Chart of Accounts.
When you're not sure
Use the "ask my CPA" pattern: copy the transaction details into the email template on Send to my CPA and ask. Getting it right matters more than getting it fast.