Thank you for this video. When I review the transactions recorded, I will find that Cash at Bank was increased, but I won't be able to tell where did this money come from! Also, if I deal with several customers who paid me frequently by wire transfer as in this example, this type of logging will not clarify who paid me how much!
Hello and thank you for this video! At around 6.52 you say that they money received INTO the (actual) bank (which is normally classed as a credit in everyone's understanding) should be entered into the ledger as a debit ??? I realise there must be two opposite entries and because we already have the Credit entry in the Income ledger we must have a debit somewhere else, but it still doesn't make sense it is debit in the bank ledger. ?? Do I think of it that:- the money came in the Bank ledger and we IN THEORY took it out to put it into the Income ledger - is that why? (This is something that has really cause a blockage in our going forward in our studies of accounting (I'm working with my son for his IGCSE)
I would like to help. Let me explain. The reason a bank considers a deposit from a customer as a credit is because the bank is looking at it from their perspective. A customers banks account is nothing more than a liability for the bank because the bank owes that money back. We always credit liabilities to increase those accounts. Hope this helps. So when a bank says WE JUST CREDITED YOUR ACCOUNT FOR 100 DOLLAR MR THOMAS, what they are really saying is WE JUST CREDIT OUR LIABILITY ACCOUNT FOR 100 DOLLAR MR THOMAS.
I think there are 2 transactions. It gets confusing if you combine 2 transactions into one. For instance they pay you for the logo and you give them the logo that's one transaction. You debit a logo from your business and you are credited with their payment. Then you debit the money from your business and credit it to the bank account. Now that everything is done electronically we've forgotten that extra step and that's why it's confusing and there is no way to keep it from being confusing now that it all seems to go directly from the customer to the bank. It's just no one changed the wording because that would be too confusing. It would throw everyone off. So to make sense you have to think of it the old way as two transactions.
so in this case, Both the sales account AND THE CASH IN BANK ACCOUNT increases by 500$ yet you call one credit and the other debit. It is a mere convention I suppose, because it has nothing to do with English terms debit and credit!
Why We call Cash Account???? If my customer pay me cash I have real money in my pocket. If money go to my account they are no Cash anymore .Just " Money in the Bank". We should call - Cash in the Bank if I own Box in the Bank and deposited real money- Cash.
Can you explain more clearly to me, please. Because from the consumers side debits are when you pay for something without debt, and credit is when you pay for something on debt.
The words "debit" and "credit" can mean different things depending on what they're being used for. In this video, I explain what those words mean in double-entry bookkeeping. In banking, for example, those words can mean something different to what they mean in bookkeeping 🙂
This is fabulous, thank you for explaining in simple terms
You're welcome!
Very helpful...thank you!!
You're welcome!
Thank you for this video. When I review the transactions recorded, I will find that Cash at Bank was increased, but I won't be able to tell where did this money come from! Also, if I deal with several customers who paid me frequently by wire transfer as in this example, this type of logging will not clarify who paid me how much!
Payments from customers can be identified with invoice numbers or something similar.
Hello and thank you for this video! At around 6.52 you say that they money received INTO the (actual) bank (which is normally classed as a credit in everyone's understanding) should be entered into the ledger as a debit ??? I realise there must be two opposite entries and because we already have the Credit entry in the Income ledger we must have a debit somewhere else, but it still doesn't make sense it is debit in the bank ledger. ??
Do I think of it that:- the money came in the Bank ledger and we IN THEORY took it out to put it into the Income ledger - is that why?
(This is something that has really cause a blockage in our going forward in our studies of accounting (I'm working with my son for his IGCSE)
I would like to help.
Let me explain.
The reason a bank considers a deposit from a customer as a credit is because the bank is looking at it from their perspective. A customers banks account is nothing more than a liability for the bank because the bank owes that money back. We always credit liabilities to increase those accounts. Hope this helps.
So when a bank says WE JUST CREDITED YOUR ACCOUNT FOR 100 DOLLAR MR THOMAS, what they are really saying is WE JUST CREDIT OUR LIABILITY ACCOUNT FOR 100 DOLLAR MR THOMAS.
@@youtubeistrash2 Thank you very much for taking the time to explain.
I appreciate it
I have the same problem trying to understand this.
Why do you say that in everyone's understanding money deposited into a bank account is a credit?
Thanks 😊
Thanks for 😮
No problem 😊
thank you sir. how do we record bank transfer and all the expenses?
I think there are 2 transactions. It gets confusing if you combine 2 transactions into one. For instance they pay you for the logo and you give them the logo that's one transaction. You debit a logo from your business and you are credited with their payment. Then you debit the money from your business and credit it to the bank account. Now that everything is done electronically we've forgotten that extra step and that's why it's confusing and there is no way to keep it from being confusing now that it all seems to go directly from the customer to the bank. It's just no one changed the wording because that would be too confusing. It would throw everyone off. So to make sense you have to think of it the old way as two transactions.
There is no such thing as debiting a logo from your business in bookkeeping.
i was thinking the same
@@mark-cunningham
But… when you download a bank statement, it shows all of the transactions where money goes out of the account as "debit" transactions.
Bank statements are made from the bank's point of view, not the customer's point of view.
so in this case, Both the sales account AND THE CASH IN BANK ACCOUNT increases by 500$ yet you call one credit and the other debit. It is a mere convention I suppose, because it has nothing to do with English terms debit and credit!
An increase in Cash at Bank is a debit and an increase in Sales Revenue is a credit in accounting.
Why We call Cash Account????
If my customer pay me cash I have real money in my pocket.
If money go to my account they are no Cash anymore .Just " Money in the Bank".
We should call - Cash in the Bank if I own Box in the Bank and deposited real money- Cash.
You can call it whatever you like. It's just old accounting convention to call it Cash at Bank.
Can you explain more clearly to me, please. Because from the consumers side debits are when you pay for something without debt, and credit is when you pay for something on debt.
The words "debit" and "credit" can mean different things depending on what they're being used for. In this video, I explain what those words mean in double-entry bookkeeping. In banking, for example, those words can mean something different to what they mean in bookkeeping 🙂