When revenue is earned and cash is received at the same time, which accounts are affected?

When revenue is earned and cash is received at the same time, which accounts are affected?

• A. Debit Cash; Credit Revenue
• B. Debit Revenue; Credit Cash
• C. Debit Cash; Debit Revenue
• D. Credit Cash; Credit Revenue

Answer: (A)

When cash is received at the same time revenue is earned, you’re increasing two different accounts: cash (an asset) and revenue (income that increases equity). In double-entry accounting, assets are increased with a debit and revenue is increased with a credit. So the proper recording is a debit to cash and a credit to revenue. This reflects more cash on hand and the business earning income. If you tried to debit revenue, you’d be increasing the wrong account (revenue is normally increased with a credit). If you credited cash, you’d be decreasing cash, which isn’t happening. The entry must balance with one debit and one credit to reflect the increase in both assets and revenue.

When cash is received at the same time revenue is earned, you’re increasing two different accounts: cash (an asset) and revenue (income that increases equity). In double-entry accounting, assets are increased with a debit and revenue is increased with a credit. So the proper recording is a debit to cash and a credit to revenue. This reflects more cash on hand and the business earning income.

If you tried to debit revenue, you’d be increasing the wrong account (revenue is normally increased with a credit). If you credited cash, you’d be decreasing cash, which isn’t happening. The entry must balance with one debit and one credit to reflect the increase in both assets and revenue.