I’ve found the best way is to remember the phrase, “Debits come in and credits go out.”
Let’s say you have a bank account. Your view of that account is opposite from the bank’s view.
You have $100 cash. That’s an asset from your POV, and it carries a debit balance on your books - when you received it, the cash “came in”.
You walk into the bank and deposit it. The cash goes out of your books, but an asset (the increase in your bank account) comes onto your books. You credit cash and debit asset.
From the bank’s POV, cash came in - they debit their cash account. And they credit your account in their books. That account is a liability from their POV - they owe you the money.
Notice how the debit and credit to cash even balanced across entities. If you talk about pluses and minuses, you’ll get confused quickly.
One of the worst things that ever happened was banks issuing “debit cards”. When you take cash from an ATM, it’s a debit from the bank’s POV. The bank carries your account as a liability, which carries a credit balance. (You are the bank’s creditor!)
So the bank debits your account (credit came in again) and credits their cash (cash went out).
You credit the bank account on your books (asset went out) and debit your cash (cash came in)
Just remember that a “debit card” reflects the banks POV and don’t let that confuse you about the meaning of “debit”. Debiting an asset is generally a good thing!
When making accounting transactions, debits always balance credits - meaning they total to zero in the code itself. It’s conventional to make assets positive (hey, having lots of assets is good, right?).
OP gains nothing but confusion by turning everything upside down.
>It’s conventional to make assets positive (hey, having lots of assets is good, right?). OP gains nothing but confusion by turning everything upside down.
I agree. However, the problem is that you can either make the vocabulary consistent or you can make the math simple, never both.
Making the math simple means you have to make a decision to always treat debits as positive and credits as negative or the other way around. You just have to be consistent.
Making the vocabulary work means you have to switch signs based on account type. But that makes the math and hence the software complicated and error prone.
Assets being positive makes sense. But debiting an asset account to make it more positive is counter intuitive. And expenses being positive doesn't make much sense either, because having lots of expenses is not so good, is it?
We're just accepting the inconsistent vocabulary as a price for having a simple mathematical model.
Not inconsistent. It’s a matter of POV. Your mortgage is an asset from the bank’s POV, but a liability from your POV.
Expenses come in and cash goes out. Debit expense, credit cash.
From an accountancy POV, the debits of a transaction equal the credits. From a software POV, the account changes total zero. There is a difference in what the word “balance” means.
That is the complete opposite of common usage. When I get a credit on my credit card statement, it means money is coming in to me. When I get a debit on my debit card, it means money is going out from me. It's not rocket science, or at least it shouldn't be. And yet somehow accountants have managed to turn it into something even more confusing.
Isn't this just a matter of perspective. You are being debited by the third party, meaning they are requesting money. The bank credits your account with money when they put something in your account.
Let’s say you have a bank account. Your view of that account is opposite from the bank’s view.
You have $100 cash. That’s an asset from your POV, and it carries a debit balance on your books - when you received it, the cash “came in”.
You walk into the bank and deposit it. The cash goes out of your books, but an asset (the increase in your bank account) comes onto your books. You credit cash and debit asset.
From the bank’s POV, cash came in - they debit their cash account. And they credit your account in their books. That account is a liability from their POV - they owe you the money.
Notice how the debit and credit to cash even balanced across entities. If you talk about pluses and minuses, you’ll get confused quickly.
One of the worst things that ever happened was banks issuing “debit cards”. When you take cash from an ATM, it’s a debit from the bank’s POV. The bank carries your account as a liability, which carries a credit balance. (You are the bank’s creditor!)
So the bank debits your account (credit came in again) and credits their cash (cash went out).
You credit the bank account on your books (asset went out) and debit your cash (cash came in)
Just remember that a “debit card” reflects the banks POV and don’t let that confuse you about the meaning of “debit”. Debiting an asset is generally a good thing!
When making accounting transactions, debits always balance credits - meaning they total to zero in the code itself. It’s conventional to make assets positive (hey, having lots of assets is good, right?).
OP gains nothing but confusion by turning everything upside down.