This bring back what I learned long time ago.
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Serious How to interpret cash at bank a/c in trial balance?
- Thread starter Bonut
- Start date
This bring back what I learned long time ago.
I m referring to bank account.
Can you recall ?
Can't...........
Can you recall ?
Yup this is the traditional double entry for book keeping accounting.
For bank statements, the debit/credit entries are reversed. Don't know why.
And this is the mother of all confusions. :*:
Could it be because bank statement is a sub-ledger...?
as for cash at bank account, owner account
so more cash, more bank is in debit side.
for as for bank , we are their loaner , creditor.
so our money is their liabilities. so when we increase saving. to them, they have more debt, so credit balance while we are bank in money.
if we withdraw money, then to them, they less debt, so their bank book increase, so debit the withdrawal.
so more cash, more bank is in debit side.
for as for bank , we are their loaner , creditor.
so our money is their liabilities. so when we increase saving. to them, they have more debt, so credit balance while we are bank in money.
if we withdraw money, then to them, they less debt, so their bank book increase, so debit the withdrawal.
This is a problem with most textbook authors who seem to always evade answering the difficult part of the question and love going on speaking the obvious. For example:
The layman's understanding has always been debit means negative and credit means positive. But the above carefully evaded clarifying conceptual misunderstanding - why asset is debit and liabilities is credit ?
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Serina & Han's saw lo....are good at "cooking the books"...you must employ her & him, after they are released as consultants, on "how to cook your books".
The ledger entries & balances looks all right, but the bank balance, may not be accurate, as the amount you have at the bank, at current moment. You have to get the current bank balance from the bank, as at now or as at close of yesterday, & reconcile with your ledger; for there may be fees, etc & unexpected items or entries, not reflected in the ledgers.
psst..book-keeping!...." book-cooking" is an art...must learn from sifu's...I know, some "book-cooking" as well., hide from internal auditor etc...ha ha ha
TS, most are confused with b/sheet and p/loss (revenue statement).
B/sheet is a snapshot of the company's assets (debit) and liabilities (credit).
This the view of the business, distinct from the owners'.
So if the company adds more assets (debit), the corresponding is reflected on the liabilities (credit).
This can be external debt or obligations to business owners (equity)
Whilst the p/loss is a period revenue statement (eg 1 year).
So the reverse view, with sales income (credit) and costs (debit).
Better to start or have a macro or structural approach, than getting lost in the nos. jungle.
Your diagram/table explains and testifies to this in a more detailed way.
B/sheet is a snapshot of the company's assets (debit) and liabilities (credit).
This the view of the business, distinct from the owners'.
So if the company adds more assets (debit), the corresponding is reflected on the liabilities (credit).
This can be external debt or obligations to business owners (equity)
Whilst the p/loss is a period revenue statement (eg 1 year).
So the reverse view, with sales income (credit) and costs (debit).
Better to start or have a macro or structural approach, than getting lost in the nos. jungle.
Your diagram/table explains and testifies to this in a more detailed way.
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Like many, I always think that "credit" means receiving money and "debit" the opposite. Apparently the meaning of these two words changes when viewed in the context of cash at bank in a trial balance.
That is the start of the confusion, and it remains so. Why is a "debit" balance a positive balance? I need to clear this conceptual hurdle. Many book authors don't understand that until this concept is clear and this hurdle cleared the remaining explanation about left having to balance with right etc. simply doesn't stick.
The natural meaning of "debit" is negative or deduct or subtract. When someone puts $100,000 into your bank account, why do you deduct instead of add ?
The explanation that says "when you credit Cash you subtract from it, when you debit Cash you add to it" repeats the confusion, not explain the confusion.
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Honestly, I stopped trying to analyse it and just accepted that as what it was to pass my exams. Being just a binary setting (DR or CR), it wasn't a difficult thing to drill into my head. This has served me well until today. So my advice to you is the same if you are a taking a bookkeeping course - don't try to understand it
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