Question

A company debits cash to increase its cash account. A bank ______________ the customer's checking account because the customer account represents a liability on the bank's balance sheet.

Answer 1

When a company debits cash, it increases its cash account. A bank credits a customer's checking account because it represents a liability on the bank's balance sheet.

Step-by-step explanation:

When a company debits cash, it is increasing its cash account. On the other hand, a bank credits a customer's checking account because the customer account represents a liability on the bank's balance sheet.

For example, let's say a customer deposits $100 into their checking account. The bank will credit the customer's account with $100, increasing the liability owed to the customer. This means that the bank now owes the customer $100, which can be withdrawn at any time.

So, while the company increases its cash account by debiting cash, the bank increases its liability by crediting the customer's checking account.