Question

An owner makes an investment of cash into the business. Such a transaction would include a:

a) Debit to Common shares
b) Credit to Cash
c) Debit to Cash
d) Debit to Accounts Receivable

Answer 1

Option (c), An investment of cash into a business by an owner increases the company's assets and owner's equity, resulting in a debit to Cash and a credit to Common shares.

Step-by-step explanation:

When an owner makes an investment of cash into a business, the accounting transaction would typically involve a debit to Cash and a credit to Common shares or another equity account. A debit to Cash reflects an increase in the company's assets, and a credit to Common shares indicates an increase in the owner's equity in the business.

This is reflective of the accounting equation where assets equal liabilities plus owners' equity. This transaction would not involve Accounts Receivable as that account is used to record credit sales to customers, not investments by owners.