In the context of journal entries, when a patient makes a payment for medical services, why should a receipt be given to the patient?

• A. To allow the patient to claim a tax deduction for the payment automatically.
• B. To record the payment as a credit to accounts receivable and a debit to revenue.
• C. To ensure the payment is not recorded in the accounting system.
• D. To provide proof of payment and support accurate recording of cash received (debit) in the accounting records.

Answer: (D)

Verified step by step guidance

1. Understand the purpose of issuing a receipt: A receipt serves as proof of payment for the patient and ensures transparency in the transaction.
2. Recognize the accounting principle involved: When cash is received, it must be accurately recorded in the accounting system to reflect the inflow of funds.
3. Identify the journal entry components: The payment should be recorded as a debit to the Cash account (to increase cash) and a credit to the Accounts Receivable account (to decrease the amount owed by the patient).
4. Clarify why the receipt is important: The receipt supports the accurate recording of the transaction and provides documentation for both the patient and the medical service provider.
5. Avoid misconceptions: The receipt is not issued for tax deduction purposes or to prevent recording the payment; its primary role is to ensure proper documentation and accurate accounting.