Multiple Choice
Which of the following best describes the effect of recording a \$1,000 cash sale on a company's journal entries?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following best describes the correct journal entry to record the addition of a new participant who pays a registration fee in cash for a workshop?
A
Debit Cash; Credit Accounts Payable
B
Debit Service Revenue; Credit Cash
C
Debit Cash; Credit Service Revenue
D
Debit Accounts Receivable; Credit Cash
Verified step by step guidance1
Understand the nature of the transaction: A new participant is paying a registration fee in cash for a workshop. This indicates that cash is being received, and revenue is being earned for providing the service (the workshop).
Identify the accounts involved: Since cash is received, the 'Cash' account will be debited to reflect the increase in assets. The revenue earned from the registration fee will be recorded in the 'Service Revenue' account, which will be credited to reflect the increase in income.
Recall the accounting equation: Assets = Liabilities + Equity. In this case, the increase in cash (asset) and the increase in revenue (equity) are consistent with the equation.
Avoid confusion with other options: 'Debit Accounts Payable; Credit Cash' is incorrect because Accounts Payable represents a liability, not revenue. 'Debit Service Revenue; Credit Cash' is incorrect because revenue is credited, not debited. 'Debit Accounts Receivable; Credit Cash' is incorrect because Accounts Receivable is used for credit transactions, not cash payments.
Construct the correct journal entry: Debit the 'Cash' account to increase assets, and Credit the 'Service Revenue' account to record the income earned from the registration fee.
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