Under which of the following circumstances would Cash be credited and Equipment be debited in a journal entry?

• A. When cash is received from a customer for services rendered.
• B. When equipment is sold for cash.
• C. When equipment is purchased by paying cash.
• D. When equipment is donated to the company.

Answer: (C)

Verified step by step guidance

1. Understand the basic accounting principle: In a journal entry, debits and credits must balance, and they represent changes in accounts. Debits typically increase asset accounts, while credits decrease them.
2. Analyze the transaction: The problem states that equipment is purchased by paying cash. This means the company is acquiring an asset (equipment) and reducing another asset (cash).
3. Determine the accounts involved: The two accounts affected are 'Equipment' (an asset account) and 'Cash' (another asset account).
4. Apply the journal entry rules: Since equipment is being acquired, it is debited to increase its balance. Cash is being paid, so it is credited to decrease its balance.
5. Write the journal entry: Debit the 'Equipment' account and credit the 'Cash' account to reflect the purchase transaction.