Question

At the beginning of 2018, Rex Co. showed a debit balance in the cash account of $20,500. Total debits to this account during the year were $45,000, and total credits during the year were $35,000. The net (increase/decrease)

Answer 1

Answer:

$10,000 increase

Explanation:

If we make a ledger account, it will be easier to understand whether it increases or decreases. The following is the ledger of cash account -

                                               Cash Account

Debit                                                                                       Credit

Date/Number                Amount ($)            Amount ($)          Date/Number

Jan. 2018 (Beginning)    $20,500        

1. Overall                           45,000                 35,000               1. Overall

Balance, December        $30,500 (See note for calculation)

2018

Note:

1. Beginning cash + Debit balances - Credit balances = Ending balance

or, $20,500 + 45,000 - 35,000 = $30,500

2. Therefore, increase in cash = Ending cash balance - Beginning cash balance = $30,500 - 20,500 = $10,000.