Cash-based accounting

[Mike or Penny Novack]

Scott Simpson wrote:

>>The concept of doing your books from the banks is weird to me, and Maf sums it
>>    
>>
>
>Yes, but as an aside,  the debit/credit concept is from the bank's
>perspective, not yours. You normally debit cash to add to your cash
>account (cash is a debit account). That's weird. Why would I debit
>cash? From the bank's perspective money is leaving them and entering
>your account. One person's debit is another person's credit.
>Debit/credit started with banks.
>
>I think that is what they said in B school...
>  
>
 From the Latin
  debit      he owes (me)
  credit     he trusts (me) -- i.e. I owe him

The assets originally being tracked amounts somebody else owed you. YOU 
debit your bank account because the bank "owes" you the money that they 
are holding for you in your bank account. Similarly you credit your 
liabilities as these are amounts that you owe somebody else. On their 
books the bank credits your account when they add in the interest 
because from their point of view, they owe you this money. It's all 
dependent on whose point of view.

Michael