Confused.. why are my expenses "profits"

[Ken Heard]

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James Kerr wrote:

> You've reversed the debit and credit. When you pay for something with 
> your credit card you should debit the expense and credit the credit 
> card account.

The best way -- for me at least -- to remember which is which: where the
money comes from (income, theft by you, etc) is a credit; where it goes
(expense, theft from you, etc) is a debit.

For example, when you pay for a good or a service with money from your
bank account, the money *comes from* the bank account; so you *credit*
your bank account.  Since the money *goes to* paying for a good or a
service you *debit* the appropriate expense account.

However, what for you is a credit for the bank is a debit, because the
money is going out of the bank to be used by you.  Conversely, any money
you deposit in a bank account is for you a debit, because that is where
- -- for you -- the money is going.  For the bank it is a credit because
the money is coming to the bank from you for the bank to use until you
want it back.

Put another way, your money in the bank for you is an asset (a debit, as
all assets are) because the bank owes it to you.  Conversely, the money
accepted from you by the bank is a liability (credit, as all liabilities
are) because the bank owes it to you.

The fact that what is a credit for you is a debit for the bank and vice
versa is for people not schooled in the arcane principles of double
entry accounting a source of confusion.

Regards, Ken Heard
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