In the context of journal entries, how is using a debit card similar to writing a check?

• A. Both are recorded as credits to the cash account.
• B. Both increase the owner's equity account.
• C. Both decrease the cash account when used for a purchase.
• D. Both increase the accounts receivable account.

Answer: (C)

Verified step by step guidance

1. Understand the concept of journal entries: Journal entries are used to record financial transactions in the accounting system. Each transaction affects at least two accounts, following the double-entry accounting principle.
2. Recognize the nature of a debit card transaction: When a debit card is used for a purchase, it directly reduces the cash balance in the bank account, similar to writing a check.
3. Identify the impact on the cash account: Both debit card transactions and checks result in a decrease in the cash account because they represent payments made by the business.
4. Clarify why accounts receivable and owner's equity are not affected: Accounts receivable represents money owed to the business, which is not relevant in this context. Owner's equity is not directly impacted by these transactions unless they are part of a larger financial event.
5. Conclude that both debit card transactions and checks are recorded as credits to the cash account, reflecting the reduction in cash when used for purchases.