cash book


D

DrAJ

I am relatively new to double entry. I am having extreme difficulty in
grasping anything, due to the complete lack from every source I try, to
explain why, in the cash book, we put money recieved or invoiced in the
debit column?
I understand account ledgers - were taking money from them so its a
debit record.
I understand general ledgers income is credit outgoing is debit (as is
the real world).
So can someone please explain in plain english why we put credit in
debit and debit in credit in the bank/cash book?????????????????????
Its driving insane.
Many thanks
 
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B

Bluepen

OK, this is the problem:

On your books cash is a debit, an asset. You increase assets with a
debit. You understand that, of course.

On the bank side they have a liability, not an asset when you deposit
cash. Deposits to a bank are what they owe their depositors, so a
credit to the bank books is a debit to your account. It is always the
opposite.

As an accounting instructor I have always had a tough time getting
banking people to understand these issues. Banking books are the
opposite of regular accounting books. Loans are assets, cash deposits
are credits, etcl So, yeah, it is confusing.

Lance
 
D

DrAJ

Unfortunately I clearly am missing something here, a debit, cash or
otherwise, is taken away, a minus, my bank account shows money taken
out -in the debit column. In school, college, university, work and
business, the debit column has always been the negative display. I
appreciate your time and kindness in trying to help, but the problem
remains. Everyone begins their explanation with a statement that
contradicts all teaching learning and work methods, I and my colleagues
have experienced. Cash, when placed in an account is crediting that
account by the amount of cash - this is the norm. So thanks, but why do
we put withdrawn amount in the credit column etc etc. Again my thanks
for your attention and my apologies for being incredibly stupid (double
entry has been about for 6/7 hundred years so I must be the stupid one
- until I find a patient tutor)
Doc.
 
B

Bob Williams

As Lance said, you are looking at the other business' side of the
situation.

For 600 or 700 years, assets have been of a debit nature (and therefore
cash has a debit balance when it is ours), liabilities of a credit
nature as are equities. Income and expenses are simply subsets of
equity.

There is nothing good or bad about debit or credit. It is simply left
side and right side, and both have to be equal.

So, if you own a business and it has $100 cash, then the business cash
account is in debit $100 and your equity (a credit) is $100 which the
business in a sense owes you.

If you borrow cash from a creditor, then your cash will increase, say
by $100, and your borrowings will increase by $100 (this is a credit).

Now, you are a bank. You borrow money from depositors and "credit"
their account (meaning you owe them money). Your cash increases by the
amount borrowed, so your debits increase by the same amount.

For your lifetime, you have experienced this with your relationship
with your bank, and your schoolteachers, none of whom probably have
ever studied accounting, have had the same experience and passed it on
to you. It is right - but only dealing with looking at the situation
from the bank's point of view. If you had looked at from your point of
view, you would have seen your bank account as a debit when it was in
good standing, as it has been for all that time.

You are not alone in this confusion. I help a lot of small businesses
with their accounting systems, and the hardest group to get this
through to are ex-bankers! And they have been taught a bit of
accounting.

I hope that helps.

Bob Williams CPA
 
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G

Guest

You aren't stupid, just looking at it the wrong way. The way you were
taught in school is to look at a debit (+) on your books. The bank shows
your deposit as a liability (to the bank because this is money that they owe
to you) which is why it shows as a credit and withdrawals are shown as
debits. Hopes this sheds some light for you and your colleagues.
 

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