DEFINITION of Bank Debits
Bank debit is a bookkeeping term for realization of the reduction of deposits held by bank customers. A bank debit occurs when a bank customer uses the funds in their account, therefore reducing their account balance. Bank debits can be the result of check payments, honored drafts or withdrawal of funds from an account. Economists also use bank debit statistics to forecast national economic trends, including the transactions demand for cash.
BREAKING DOWN Bank Debits
On a bank's balance sheet, deposits are liabilities: they represent a source of capital and obligations to the customer. As a liability, deposits have a credit balance. In contrast, the cash deposits supply to the bank are assets, which have debit balances.
When a check is paid, the bank's obligation to the customer becomes smaller, since fewer funds are supplied to the bank. The liability that deposits represent is reduced through a debit for the amount of the check. At the same time, the bank's cash is smaller as well, and so the assets of the bank are reduced through a credit.