Which of the following best describes the effect of recording a \$5,000 cash sale on a company's journal entries?

• A. Debit Cash \$5,000; Credit Sales Revenue \$5,000
• B. Debit Sales Revenue \$5,000; Credit Cash \$5,000
• C. Debit Cash \$5,000; Credit Accounts Receivable \$5,000
• D. Debit Accounts Receivable \$5,000; Credit Sales Revenue \$5,000

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the nature of the transaction. A cash sale means the company receives cash immediately in exchange for goods or services provided. This impacts both the Cash account and the Sales Revenue account.
2. Step 2: Recall the rules of debits and credits. An increase in assets (like Cash) is recorded as a debit, while an increase in revenue (like Sales Revenue) is recorded as a credit.
3. Step 3: Identify the accounts involved. In this case, the accounts are 'Cash' (an asset account) and 'Sales Revenue' (a revenue account).
4. Step 4: Determine the correct journal entry. Since Cash is increasing, it will be debited for \$5,000. Since Sales Revenue is increasing, it will be credited for \$5,000.
5. Step 5: Compare the options provided in the problem. The correct journal entry is 'Debit Cash \$5,000; Credit Sales Revenue \$5,000,' as it reflects the increase in both Cash and Sales Revenue due to the cash sale.