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

When cash is received on account, which of the following journal entries is correct?

Debit Revenue; Credit Cash

Debit Cash; Credit Accounts Receivable

Debit Cash; Credit Revenue

Debit Accounts Receivable; Credit Cash

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Verified step by step guidance

Understand the scenario: Cash is received on account, meaning a customer is paying off an amount they previously owed (Accounts Receivable). This transaction affects the Cash and Accounts Receivable accounts.

Recall the accounting principle: When cash is received, the Cash account increases, which is recorded as a debit. When Accounts Receivable decreases (because the customer has paid), it is recorded as a credit.

Analyze the options provided: The correct journal entry should reflect an increase in Cash (debit) and a decrease in Accounts Receivable (credit).

Eliminate incorrect options: 'Debit Revenue; Credit Cash' is incorrect because revenue is not involved in this transaction. 'Debit Cash; Credit Revenue' is incorrect because revenue is not being earned here. 'Debit Accounts Receivable; Credit Cash' is incorrect because it reverses the proper accounts.

Select the correct journal entry: 'Debit Cash; Credit Accounts Receivable' is the correct entry because it properly reflects the increase in Cash and the decrease in Accounts Receivable.