Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Theo needs to record new income earned by his business. Which of the following journal entries correctly reflects this transaction?

Debit Cash; Credit Revenue

Debit Revenue; Credit Cash

Debit Expenses; Credit Revenue

Debit Revenue; Credit Accounts Receivable

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Verified step by step guidance

Understand the nature of the transaction: Theo's business has earned new income, which means the business has generated revenue. Revenue increases equity and is recorded as a credit in the journal entry.

Determine the account receiving the cash or benefit: If the income is earned and cash is received immediately, the Cash account (an asset) increases. An increase in assets is recorded as a debit.

Match the accounts: The correct journal entry should reflect a debit to the Cash account (to show the increase in cash) and a credit to the Revenue account (to show the increase in income).

Eliminate incorrect options: Review the other options provided. For example, 'Debit Revenue; Credit Cash' is incorrect because revenue is not decreased in this transaction. Similarly, 'Debit Expenses; Credit Revenue' is incorrect because expenses are unrelated to this income transaction.

Confirm the correct journal entry: The correct journal entry is 'Debit Cash; Credit Revenue,' as it properly reflects the increase in cash and revenue due to the income earned.