Question

The receipt of cash from customers to whom the goods have already been sold on credit would be recorded by a:

a. Debit to Cash and a credit to Accounts Payable
b. Debit to Cash and a credit to Sales Revenue
c. Debit to Cash and a credit to Accounts Receivable
d. Debit to Cash and a credit to Inventory

Answer 1

The receipt of cash from customers to whom the goods have already been sold on credit would be recorded as a debit to Cash and a credit to Accounts Receivable.

Step-by-step explanation:

The correct answer is: c. Debit to Cash and a credit to Accounts Receivable.

When cash is received from customers who have previously purchased goods on credit, it is recorded as a debit to the Cash account because cash is being received, and a credit to the Accounts Receivable account because the customer's outstanding balance is being reduced.

For example, if a company sold $500 worth of goods to a customer on credit and later received $500 in cash from that customer, the journal entry would be:

Debit: Cash $500
Credit: Accounts Receivable $500