Petty Cash Account (1230) shows income as Debit?


Just doing my end of year and noticed my Balance sheet shows petty cash £290.33 as a liability. Trying to find out what has happened so clicked from here to petty cash account and it shows payments into here as debits and money out as credits??? Completely confused now and non the wiser to understanding how to rectify the liability.

Please can someone help me get my head around this?
Thank you.

That is correct. From the point of view of your own books, deposits into a bank account show as debits and withdrawals as credits. The reason this seems counter intuitive is that when you receive a statement from your bank it shows the account from their perspective rather than yours - when you pay money into your current account, on the banks books this is money moving from you to them:

  • Cr Joe Bloggs
  • Dr Bank’s big pile of cash

so it shows as a credit on your bank account statement.

When looking at nominal ledgers I always think of it as “credit” saying where the money comes from and “debit” saying where it went to. If I make a sale it’s a credit from General Sales (the source of the money) and a debit to Petty Cash (where the money ended up), if I buy a new fixed asset it’s a credit from the Bank account (the source of funds to make the purchase) and a debit to Fixtures and Fittings (or whatever).

So in the chart of accounts assets and expenses are debits, sales and liabilities are credits - if you look at the Balance Sheet report (as opposed to the CoA/Trial Balance) you should see the bank accounts correctly listed in the assets section, they’d only show under liabilities if they were overdrawn.

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