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Discussion question: According to bbn ourvrules of debits and credit, an increase to an asset(such as...

Discussion question:
According to bbn ourvrules of debits and credit, an increase to an asset(such as our cash account) is a DEBIT and a decrease is an asset is a CREDIT. Why then when we look at out bank statements is a deposit a Credit? Why does this seem backwards?

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Answer #1

The bank statement is prepared from bank's perspective and not from its customer perspective. Any amount deposited in bank account is liability for bank which they need to repay to its customers and thus when cash is deposited the liability of bank increases and thus they credit the amount. In case of cash withdrawal by customer the bank statement would show it has debit as liability of bank is reduced to extent of amount withdrawn and thus bank now will have to pay lessor amount. Liabilities are debited for decrease in balance.

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