[GNC] Credit Card Format Good?

[Stan Brown]

On 2019-09-16 08:54, Mike or Penny Novack wrote:
> On 9/15/2019 10:01 PM, Peter West wrote:
>> . That means that increases in an Asset are debits, while decreases
>> are credits; and increases in Liabilities (or Equity) are credits,
>> while decreases are debits.
>>
>> Income increases assets; an increase in an asset is a debit; therefore
>> the balancing entry for income must be a credit.
>> Expenses decrease assets; a decrease in an asset is a credit;
>> therefore the balancing entry for expenses must be a debit.
>>
> Not necessarily, and that needs to be stressed precisely because this
> began with credit cards.
> 
> An income item will increase assets OR decrease liabilities << in either
> case, a debit >>

Hmm. I know what you mean, but I would not say it this way because it
could be read as "an income item is a debit." It might be helpful to be
more explicit:

An income item is a credit. Because each transaction must be balanced,
the item that balances an income item must be a debit. That debit is
typically an increase to an asset (for instance cash), but it could be a
decrease to a liability (for instance debt, because if someone forgives
a debt you owe that forgiveness is income to you).

A special point about credit cards, since that is wherte this thread
started ...

Your credit-card balance is a liability, so when you make a purchase
that is a credit to Liabilities:Whizzo Credit Card and increases the
balance in that account, balanced by a debit to an asset or expense
account which increases the balance in _that_ account. When you make a
payment, that decreases the balance in that account, and therefore it is
a debit to that account, balanced by a credit to Assets:Cash, which
reduces the balance in _that_ account.

This point is often confused, because when you make a return or payment
you get a credit slip, not a debit slip as you might expect. Thus,
before we learn bookkeeping, we get used to thinking that "a credit to
my Whizzo Credit Card" is a good thing, but this is actually backward.
In fact, while your credit account is a liability on your books, it is
an asset on the merchant's books. A return or payment reduces the
merchant's asset balance and is thus a credit as far as the merchant is
concerned, but it reduces _your_ liability and is thus a debit as far as
you are concerned. Thus debits and credits balance not only within one
set of books but between the books of different entities!

-- 
Regards,
Stan Brown
Tompkins County, New York, USA
https://BrownMath.com
http://OakRoadSystems.com