Multiple Choice
When a company receives payment of both principal and interest on a note receivable dated December 16, which of the following journal entries is correct?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following is the correct journal entry to record the purchase of an asset for cash?
A
Debit Expense account; Credit Cash account
B
Debit Asset account; Credit Revenue account
C
Debit Asset account; Credit Cash account
D
Debit Cash account; Credit Asset account
Verified step by step guidance1
Understand the nature of the transaction: The purchase of an asset for cash involves acquiring an asset and reducing cash, which is part of the accounting equation (Assets = Liabilities + Equity).
Identify the accounts involved: The accounts affected are the Asset account (which increases) and the Cash account (which decreases).
Determine the type of accounts: The Asset account is a balance sheet account that represents resources owned by the business, and the Cash account is also an asset account but decreases due to the payment.
Apply the rules of debit and credit: In accounting, an increase in an asset account is recorded as a debit, and a decrease in an asset account (like Cash) is recorded as a credit.
Construct the journal entry: Debit the Asset account to reflect the increase in assets, and Credit the Cash account to reflect the decrease in cash.
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