Double Entry Accounting for a Cash Sale

Suppose a business makes a cash sale for £100, it’s double-entry accounting would be as follows:

CASH ACCOUNT
Debit £100

SALES ACCOUNT
Credit £100

This is because the cash asset increases by £100 (and an increase in an asset is a debit)

Note that the debits and credits for the cash account (ie the bank account) look back to front if you are comparing it to how this would appear on the bank statement.  This is because the bank statement is drawn up from the bank’s point of view and not the customer’s.  For example, when you have a credit balance shown on your bank statement (ie, when you are in credit with the bank) then that is the amount of the bank’s liability to you.  But in your business accounts, this would be a cash asset – which would be a debit balance.

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