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The double entry for the cash account in your books is the opposite terminology used by the bank to present your transactions. For example, in your statement you would see cash coming in as a credit and a payment as a debit. This is because the bank is showing the debits and credits from their point of view - you have money held in the bank that they are obliged to give you when you request a withdrawal.

Every accounting entry has one side posted to the P&L and the other to the Balance Sheet (unless you're reclassifying between accounts but that's for another time). In the P&L a debit entry indicates a cost to you, and a credit indicates income earned. In the balance sheet, a debit will increase an asset or decrease a liability, vice versa for a credit.

To record a purchase in your books you have to post one side to the P&L and the other to the balance sheet. Because of the rules mentioned above you debit an expense, and because you need to balance out the entry, you post the credit to cash, which conveniently decreases your cash account asset.

It's confusing at first but easier when you understand and accept the mnemonic DEADCLIC.




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