When the bank sends you a statement of their record of your account, they show you in credit when you have money to spend. This is because they know that they owe you that money when you want to use it.

In your own business accounts you will record this amount the opposite way around - it will be a debit because the bank owes you this amount of money.

This is all you have to remember - the normal balance of a bank account will be a debit balance in your accounting records. The same goes for other assets, such as computers and trading stock.

So when you put more money in your bank account, you will debit your bank account record. The debits add to a higher figure. A bank deposit is a debit to your bank account record.

When you spend money from your bank account, you will credit your bank account record. The credit is taken from the debit to leave a lower figure. A bank cheque is a credit to your bank account record.

If you spend more money than is available in the bank, the credit amount will exceed the debit balance available, leaving a credit balance amount, which is the amount you now owe on the bank overdraft.

Liabilities such as bank overdrafts and loans are normally a credit balance. They are the opposite of assets, such as cash in the bank.

With double entry accounting, every entry is recorded to affect at least two accounts in opposite ways, so that the total of all entries is zero. This means that the accounting records should always balance - the debits always equal the credits. This makes it possible to find errors.

As you now know, when cash is put into the bank, we debit the bank account record. We also credit the account from where the money came. If it came from a new bank loan, we would credit a loan account record. The normal balance of liability accounts such as a loan is a credit.

If cash banked was provided by the business owners, as a loan to the business, this is also recorded as a credit to the owners funds account. The normal balance of owners funds is therefore also a credit, just like liabilities to the bank and others.

If cash is banked from sales, this will be a credit to the sales account. The normal balance of income accounts is also a credit.

Of course, if we are recording a payment from the bank, then we must reduce the amount left in the bank account by recording a credit to that account. The matching entry will be a debit to another account. For example, when we buy an asset, such as a computer we will debit that account. When we pay an amount off a bank loan, we will debit that account, which will reduce the amount recorded as still owing on the loan. When we pay an on-going expense of the business such as a phone bill, we will debit that account. The normal balance of expense accounts is a debit.

Since the normal balance of income accounts is a credit, and the normal balance of expense accounts is a debit, if we put them together we will be taking the expenses from the income. The difference is the business profit which will normally be a credit - the income exceeds the expenses. The profit belongs to the business owners, so it is added to the money that they put in to start the business. The normal balance of owners funds is a credit.

All of this follows, if you just remember that the normal balance of asset accounts, such as the bank, is a debit.