Mr. Johnson paid his lunch bill of \$29.90 in cash. Which of the following is the correct journal entry to record this transaction?

• A. Debit: Meals Expense \$29.90; Credit: Cash \$29.90
• B. Debit: Meals Expense \$29.90; Credit: Accounts Receivable \$29.90
• C. Debit: Cash \$29.90; Credit: Meals Expense \$29.90
• D. Debit: Accounts Payable \$29.90; Credit: Cash \$29.90

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the nature of the transaction. Mr. Johnson paid his lunch bill in cash, which means there is an expense incurred (Meals Expense) and cash is used to settle the payment.
2. Step 2: Recall the basic accounting principle of double-entry bookkeeping. Every transaction affects at least two accounts, one with a debit entry and the other with a credit entry.
3. Step 3: Identify the accounts involved. In this case, the accounts are 'Meals Expense' (an expense account) and 'Cash' (an asset account).
4. Step 4: Determine the impact on each account. Since Mr. Johnson incurred an expense, 'Meals Expense' should be debited to reflect the increase in expenses. 'Cash' should be credited to show the decrease in cash as it was used to pay the bill.
5. Step 5: Write the journal entry. The correct journal entry is: Debit 'Meals Expense' for \$29.90 and Credit 'Cash' for \$29.90. This reflects the payment of the lunch bill in cash and the corresponding increase in expenses.