Multiple Choice
Which tool is primarily used to record business transactions by applying the rules of debits and credits?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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When a business pays cash for a cell phone bill, which two accounts are affected in the journal entry?
A
Cash and Utilities Expense
B
Cash and Revenue
C
Accounts Receivable and Cash
D
Cell Phone Equipment and Accounts Payable
Verified step by step guidance1
Identify the nature of the transaction: The business is paying cash for a cell phone bill, which is an expense incurred for utilities (cell phone usage). This means the transaction involves an expense account and the cash account.
Determine the accounts affected: Since the payment is for a cell phone bill, the expense account affected is 'Utilities Expense.' The payment is made in cash, so the 'Cash' account is also affected.
Understand the journal entry structure: In accounting, expenses are debited because they decrease equity, and cash is credited because it decreases the asset account.
Write the journal entry: Debit the 'Utilities Expense' account to record the expense incurred, and credit the 'Cash' account to reflect the reduction in cash due to payment.
Review the options provided: The correct answer is 'Cash and Utilities Expense,' as these are the two accounts impacted by the transaction.
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