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Explain why the bank credits your account when you make a deposit and why your personal accounting records would treat deposits differently?
Wiki User
∙ 8y ago
This is an accountant's answer, so the answer may not make sense to non-debits-and-credits-people...sorry.
When Random Guy deposits $500 into his bank account, he debits his account $500 to record the deposit. He "owns his money", so in accountant-speak, the debit increases an asset account. However, from the bank's perspective, the incoming deposit from Random Guy doesn't belong to them...they simply have the use of Random Guy's deposit but they must have $500 available to Random Guy whenever he chooses to use it. Therefore, Random Guy's deposit is an asset on his own books/check register, but it is a liability (payable) on the bank's books because they owe Random Guy $500. As a result, the bank records an increase to a liability account by crediting Random Guy's account.
Hope this helps.
Wiki User
∙ 8y ago
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