Are cash book payments, which reduce the cash in the bank, debits or credits?

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Study for the AAT Level 2 Introduction to Bookkeeping Test. Use flashcards and multiple choice questions with hints and explanations. Prepare effectively for your exam!

Multiple Choice

Are cash book payments, which reduce the cash in the bank, debits or credits?

Explanation:
When something decreases an asset, it is recorded as a credit. The bank balance is an asset, so a payment that reduces cash in the bank is a credit entry. In the cash book, payments are written on the right-hand side, which represents credits for the bank account. The opposite side would be used for receipts, which increase the bank balance. So cash book payments are credits. For example, paying a supplier reduces cash (credit to Bank) and increases an expense (debit to the expense).

When something decreases an asset, it is recorded as a credit. The bank balance is an asset, so a payment that reduces cash in the bank is a credit entry. In the cash book, payments are written on the right-hand side, which represents credits for the bank account. The opposite side would be used for receipts, which increase the bank balance. So cash book payments are credits. For example, paying a supplier reduces cash (credit to Bank) and increases an expense (debit to the expense).

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