Final answer:
To record the transaction of receiving $50 cash on account at Blue Light Arcade, debit the cash account and credit the accounts receivable account to reflect the increase in cash and the payment of the customer's debt.
Step-by-step explanation:
You asked how to record the transaction for Blue Light Arcade receiving $50 cash on account for a birthday party held two months ago. To properly record this transaction in the company's accounting books, you would debit the cash account and credit the accounts receivable. This reflects the receipt of cash which was previously recorded as revenue at the time the party was held. The entry would be as follows:
This action means that the business is increasing its cash balance and simultaneously decreasing the amount owed by customers (Accounts Receivable) since the customer has just paid part of what they owed.
In a real-world scenario similar to yours, Noel noticed a significant billing error and took proactive steps to prevent a financial loss. Just like Noel's awareness saved his company from overpaying, accurately recording transactions prevents financial discrepancies in a business's accounting records.