Cash is used in a Debit for holding a large number of expenses. It has a balance of a normal debit. And it will decrease with credit and increase with a debit. In simple words, cash is an asset and it was increasing in every journal entry because this is debit.
Advantages of Cash as an asset:
Having cash means that you purchase daily goods whatever you need. It can control every entity of past events we used. Every cost of measurement was going smoothly and was reliable. It was only a risk-free investment. It will also be used as an emergency fund.
Disadvantages of Cash as an asset:
With an interest rate, you receive money with a lower rate of inflation. Holding a large rate of cash, you will also be getting taxed in a long term. Getting visibility of losses like equity. When other investments come along, we don’t get attached to the risk premium. Credit was highly much increased.
Features of Cash:
Cash was exchanged from the bank easily as it was durable. Transfer one to another place as it was portable. Easily divided like 1000 to 100 as it was divisible. Different values of cash come in the same size and shape as it was uniform. The central bank allowed currency notes as it was acceptable.
Role of Credit:
Credit was a source of economic benefit. It is a short-term process for financing a company and the company was extended this process with the help of a bank. For example, suppose a manufacturer company of video games invests some money in purchasing raw materials to convert them into good inventory. However, good inventory was not immediately sold so that’s why the company takes credit loans to run a business without facing a shortfall and releases the company capital in the form of inventory.
Advantages of Credit:
The company was not worried about issues of liquidity because Cash Credit helps in company financial crises. The arrangement of credit was easy from any bank. It is flexible and made Cash Credit many times. It can be reducing the tax burden on the company because of interest payments. Cash Credit is used for the borrower to make less on his financing.
Disadvantages of Credit :
High-interest rate as compared to traditional loans. Charges of commit were minimum on the borrower. It was a short-term loan and also difficult in securing. Never give an extended period and make a new policy after expiration. Every person especially borrowers faced a lot of problems in this.
Features of Credit:
The period of Cash Credit was approx. 12 months. Credit was securing property, fixed assets, and stocks. It gives us interest in a running balance.
Role of Debit:
Debit represents the destination of an asset. A destination is an economic benefit that can flow to include assets like cash, buildings, and amount owed to you by others, but also expenses where a business pays a 3rd party for a good or service they have provided, and dividends where a business distributes some of its cash to its owners. For example, a person went into the company and use a debit card to purchase an iPhone because Debit works as an asset it removes the payment of an iPhone from a person’s bank account.
Advantages of Debit:
It was related to Cash as an asset. It was not charged annual fees. It was directly connected to our bank. It was best for purchasing smaller goods.
Disadvantages of Debit:
Requiring a pin is not good for everyone. Getting over-draft payment fees. Funds are limited.
Features of Debit:
Gives us a Cash loan quickly within a couple of minutes. Use debit just like our bank account. Getting funds when we need them.
Conclusion:
From the entire Topic “Is cash Debit Or credit?” We have concluded that Cash is debited because of its usage by people who cannot afford a high amount of expenses every day.
Cash is Debit or Credit? Discuss.
It depends on the financial statements in banking terms because we all know that Cash is an asset. We are pretty much sure that Cash is decreasing in debit when making payments from another resource through Cash.
Is debit good or not? Discuss.
I prefer this because it was good for Cash withdrawals and prevents us from overspending money and debt. ATM is a good example of this purpose.
Is credit good or not? Discuss.
It will help us to get larger purchases like a car, home but in a certain amount of time and I don’t think it is good because a middle-class can affords a big car, homes. They are already stuck in home expenses that’s why I don’t prefer this.
