Multiple Choice
Which of the following journal entries correctly records the purchase of office supplies for \$500 cash during July?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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Which of the following is the correct journal entry when you deposit \$4,000 in cash into a checking account for your business?
A
Debit Checking Account \$4,000; Credit Cash \$4,000
B
Debit Cash \$4,000; Credit Accounts Payable \$4,000
C
Debit Revenue \$4,000; Credit Cash \$4,000
D
Debit Cash \$4,000; Credit Owner's Equity \$4,000
Verified step by step guidance1
Understand the nature of the transaction: Depositing \$4,000 in cash into a checking account for your business means transferring money from one asset (Cash) to another asset (Checking Account). This does not involve liabilities, revenue, or equity.
Recall the accounting equation: Assets = Liabilities + Equity. Since this transaction only affects assets, it will involve debiting one asset account and crediting another asset account.
Determine the accounts involved: The Checking Account is the account receiving the deposit, so it will be debited to increase its balance. The Cash account is the account being reduced, so it will be credited to decrease its balance.
Apply the double-entry accounting rule: For every transaction, there must be at least one debit and one credit of equal amounts. In this case, Debit Checking Account \$4,000 and Credit Cash \$4,000.
Verify the journal entry: Ensure the debit and credit amounts are equal and the accounts affected align with the transaction. The correct journal entry is Debit Checking Account \$4,000; Credit Cash \$4,000.
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