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ACC 280 UOP Class Notes

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What do you think of when you hear the word debit? What do you think of when you
hear the word credit? Why does your bank statement show a credit for an increase in
your cash balance? Is an increase to your bank statement a debit or a credit? What
method would you use to summarize transactions and transfer to the ledger?
When I hear the word “debit” I think of a debit card. When I think of the work “credit” I
think of a credit card. What is the difference when they are both plastic cards that spend
money you don’t have? The critical difference is that a debit card spends money you do
have, just not with you it’s in your banking account (but not for long). The credit card
spends money you don’t have, you are borrowing the money from the bank that holds your
Visa account (MC or Discover).
Your bank statement shows a credit for an increase in your cash balance because it is their
account of your balance and from their perspective it is a liability. Consequently; when you
withdraw monies from your account by using your debit card it is a debit to their account of
your balance. I assume that is why it is called a debit card.
Your own account of your bank balance would be a mirror image of what the bank does. If
you were to create a ledger for your personal finances, you would create an asset called
“cash”. When you increase your cash you would need to debit your cash account.

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Question: What do you think of when you hear the word debit? What do you think of when you hear the word credit? Why does your bank statement show a credit for an increase in your cash balance? Is an increase to your bank statement a debit or a credit? What method would you use to summarize transactions and transfer to the ledger?    When I hear the word “debit” I think of a debit card.  When I think of the work “credit” I think of a credit card.  What is the difference when they are both plastic cards that spend money you don’t have?  The critical difference is that a deb ...
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Anonymous
Awesome! Perfect study aid.

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