Ext. Trial Balance - Bank Dr or Cr?

Katie22

The other day during a practice paper for AP1 our tutor announced people were getting a question wrong. The question had account balances that needed to be put in a trial balance and then the balances had to be transferred to IS or SFP. The bank balance was a credit and several of us put it as a liability in the SFP and we were told that was wrong and it was an asset because it had a credit balance. I have always felt quite sound in my knowledge of debits and credits and exceeded in all my exams. Debit = money in, credit = money out, so a debit would mean you have money there which is an asset and a credit would mean the account is overdrawn which is a liability. We didn't end up getting the answers for the questions so who was right? I have my AP1 exam next week and I'm really panicking now that I have misunderstood loads of stuff!

Nps

Was the bank balance shown as a credit in your own books or as a credit in a bank statement? Remember that the bank will view money in your bank account as a credit (as it is a liability to them) but it will be a debit in your books (as it's an asset). Hence the general public will say that their bank account is in credit when strictly speaking that's not actually true from their point of view.