Multiple Choice
When a previously written off account is collected, which journal entry is most appropriate?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
When cash is received on account, which of the following journal entries is correct?
A
Debit Revenue; Credit Cash
B
Debit Cash; Credit Accounts Receivable
C
Debit Cash; Credit Revenue
D
Debit Accounts Receivable; Credit Cash
Verified step by step guidance1
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.
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