[lisper]

> When I deposit money, it modifies two accounts at the bank.

Yeah, I get that. I don't see what that has to do with the labels used to describe the transaction.

Actual physical cash is weird because it's an asset to its owner and a liability to the rest of society. But when you deposit cash in a bank, the bank doesn't become the owner of the cash. It has borrowed that cash from you. So that cash is both an asset (because having borrowed it from you it can turn around and loan it to someone else) and a liability (because the bank is in debt to you for the amount of the deposit).

A simpler example is depositing a check. In that case, money just gets transferred from the payor to the payee. It's a debit from the payer's account and a credit to the payee's account. Or at least that's how it should be.

[mhink]

> No. This transaction does not increase liability in any absolute sense. It increases liability only from the bank's perspective. From your perspective, it increases assets.

What you're missing here is that if I were to keep my own records, I would also list two accounts. When I look at my bank statement online, what I'm looking at is the bank's records. If I kept my own books, it would be the same thing, but in reverse, like this:

    MHINK'S RECORDS
    - CREDIT mhink's cash account $100 (decreasing mhink's assets)
    - DEBIT mhink's account for the bank $100 (increasing mhink's assets)

    BANK'S RECORDS
    - CREDIT the bank's account for mhink $100 (increasing the bank's liability)
    - DEBIT bank's cash account $100 (increasing the bank's assets)

> It has borrowed that cash from you. So that cash is both an asset (because having borrowed it from you it can turn around and loan it to someone else) and a liability (because the bank is in debt to you for the amount of the deposit).

The cash itself isn't both things- it's only ever an asset.

When I transfer cash from my wallet to the bank, I'm converting $100 of value from one type of an asset to another: from cash, to "a debt I'm owed by the bank".

The bank also didn't change its total position. It took on "a debt owed to mhink" (a liability), but gained "cash" (an asset).

[lisper]

> What you're missing here is that if I were to keep my own records, I would also list two accounts.

The passage you quoted is from an earlier comment, so you are responding to something way out of context.

Let's rewind:

> Unlike the bank, your account at the utility company represents how much you owe them. So the meaning of debit/credit is reversed, but so is the direction of responsibility: your account at the utility provider is money you owe them, which is an asset.

No. There is no such thing as "an asset" without further qualification. The money you owe the utility company is an asset to them, but to you it's a liability. This is true for all financial instruments, including cash. Cash is an asset to its owner, a liability to society at large. So...

> The cash itself isn't both things- it's only ever an asset.

No, cash is a liability to society at large. The bookkeeping for this happens at the central bank. See:

https://www.federalreserve.gov/monetarypolicy/bst_frliabilit...

"The major items on the liability side of the Federal Reserve balance sheet are Federal Reserve notes (U.S. paper currency)..."