If the cash is decreasing, then we need to record it on the credit side of the cash account.įor example, the company makes the payment to its supplier in cash. In this case, cash is increased and we need to debit it. For example, the company receives the payment from the customers in cash. In financial statements, cash is debited when there is increasing in it. Related article Whare is the Fictitious Asset?: Definition, Example, and Listįor example, if the company purchases a new computer, then the asset is increasing. Decreasing assets result in credit records and increasing assets result in debiting to assets. Once we know the exact element, then we can clearly know whether cash is debit or credit.Īs we mentioned above, cash is the assets and clearly, it is belonging to the assets element of the financial statements.Īs long as it belongs to the assets element, the rule of debit or credit is applied the same.Īssets reporting in the balance sheet or statement of financial position. Is cash debit or credit?īefore diving into the debit or credit, we need to assess what kind of financial statements element that cash belongs to. It does not matter whether the cash is used for small or large payments and it does matter if the cash is collected from customers or from whatever sources, from an accounting perspective, cash is considered an asset and it is classified as current assets which are reported in the balance sheet. The company might also hold the cash that it collects from customers but this kind of cash will be deposited into the company’s bank account the following day. Sometimes, the company might keep a large amount of cash for making payments to certain suppliers that accept only cash rather than bank transactions like bank transfers or check. For example, the company holds petty cash for making payments on small office expenses. Cash is the company’s current assets holding for small expenses in the office or for a certain large amount of cash transactions.
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