Final answer:
To record the adjusting entry for a deposit on July 31, debit Cash and credit Revenue, reflecting the accrual accounting principle that income is recognized when earned, regardless of when the cash is received.
Step-by-step explanation:
The correct answer to record the adjusting entry related to a deposit is option A) Debit Cash, Credit Revenue. Adjusting entries are made in accounting to record revenues that have been earned but not yet recorded in the general ledger, and the expenses that have been incurred but not yet recorded. This is a part of the accrual accounting method, which aims to record income and expenses when they are earned or incurred, rather than when cash changes hands.
If you've confirmed that the deposit on July 31 represents revenue earned by the company, then you would debit Cash to increase the asset and credit Revenue to recognize the income. This entry increases the balance sheet account Cash and the income statement account Revenue, which ultimately affects the net income reported on the income statement.