Multiple Choice
Which of the following steps of the accounting cycle involves recording transactions by using debits and credits in the general journal?
138
views
2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
What would be the correct journal entry to record a cash sale of \$20?
A
Debit Accounts Receivable \$20; Credit Sales Revenue \$20
B
Debit Sales Revenue \$20; Credit Cash \$20
C
Debit Cash \$20; Credit Accounts Payable \$20
D
Debit Cash \$20; Credit Sales Revenue \$20
Verified step by step guidance1
Step 1: Understand the nature of the transaction. A cash sale means the company receives cash immediately in exchange for goods or services provided. This impacts the Cash account and the Sales Revenue account.
Step 2: Identify the accounts involved. Since cash is received, the Cash account will be debited (increased). Sales Revenue, which represents income earned, will be credited (increased).
Step 3: Recall the accounting equation and double-entry bookkeeping principles. Debits increase asset accounts like Cash, while credits increase revenue accounts like Sales Revenue.
Step 4: Write the journal entry format. The debit entry will be: Debit Cash \$20. The credit entry will be: Credit Sales Revenue \$20.
Step 5: Ensure the journal entry balances. The total debits (\$20) must equal the total credits (\$20), maintaining the integrity of the accounting equation.
Related Videos
Related Practice
