Question

On July 31, ALOE Inc. received $5,000 cash from a customer who previously purchased ALOE's products on account. What entry should ALOE Inc. record at the time it receives cash?A) Debit Cash, $5,000; credit Service Revenue, $5,000.B) Debit Accounts Receivable, $5,000; credit Cash, $5,000.C) Debit Cash, $5,000; credit Accounts Receivable, $5,000.D) Debit Cash, $5,000; credit Accounts Payable, $5,000.

Answer 1

Answer:

C. Cash, $5,000; credit Accounts Receivable, $5,000

Explanation:

The journal entry to record the given transaction is shown below:

Cash A/c Dr $5,000

      To Account receivable A/c $5,000

(Being the cash is received from the customer is recorded)

Since cash is received so we debited the cash account that increases the current assets and on the other hand, we credited the customer account i.e account receivable that decreases the current assets