Multiple Choice
In double-entry accounting, which of the following best describes what a debit represents?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
In the context of journal entries, how is using a debit card similar to writing a check?
A
Both are recorded as credits to the cash account.
B
Both increase the owner's equity account.
C
Both decrease the cash account when used for a purchase.
D
Both increase the accounts receivable account.
Verified step by step guidance1
Understand the concept of journal entries: Journal entries are used to record financial transactions in the accounting system. Each transaction affects at least two accounts, following the double-entry accounting principle.
Recognize the nature of a debit card transaction: When a debit card is used for a purchase, it directly reduces the cash balance in the bank account, similar to writing a check.
Identify the impact on the cash account: Both debit card transactions and checks result in a decrease in the cash account because they represent payments made by the business.
Clarify why accounts receivable and owner's equity are not affected: Accounts receivable represents money owed to the business, which is not relevant in this context. Owner's equity is not directly impacted by these transactions unless they are part of a larger financial event.
Conclude that both debit card transactions and checks are recorded as credits to the cash account, reflecting the reduction in cash when used for purchases.
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