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

Which of the following transactions is recorded with a debit to Cash and a credit to Interest Receivable?

Borrowing cash from a bank

Payment of interest expense

Accrual of interest earned but not yet received

Collection of previously accrued interest income

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Verified step by step guidance

Step 1: Understand the nature of the transaction. The problem states that the transaction involves a debit to Cash and a credit to Interest Receivable. This indicates that cash is being received, and the Interest Receivable account is being reduced.

Step 2: Recall the purpose of the Interest Receivable account. Interest Receivable is an asset account that represents interest income earned but not yet collected in cash. When the interest is eventually collected, the account is reduced.

Step 3: Analyze the options provided. Borrowing cash from a bank would involve a debit to Cash and a credit to a liability account, not Interest Receivable. Payment of interest expense would involve a credit to Cash and a debit to Interest Expense, not Interest Receivable. Accrual of interest earned but not yet received would involve a debit to Interest Receivable and a credit to Interest Income, not Cash.

Step 4: Focus on the correct answer: Collection of previously accrued interest income. This transaction matches the description because it involves receiving cash (debit to Cash) and reducing the Interest Receivable account (credit to Interest Receivable).

Step 5: Summarize the journal entry for the correct transaction. The journal entry would be: Debit Cash (to record the receipt of cash) and Credit Interest Receivable (to reduce the receivable as the interest has now been collected).