A company borrows cash from a local bank. The company records this transaction with a: Multiple Choice a. Debit to Accounts b. Receivable Debit to Cash c. Credit to Accounts Payable d. Credit to Retained Earnings

Question

Theresa Weber

Business

28 December, 06:05

A company borrows cash from a local bank. The company records this transaction with a: Multiple Choice a. Debit to Accounts b. Receivable Debit to Cash c. Credit to Accounts Payable d. Credit to Retained Earnings

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Answers (1)

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Lawson Chapman · Answer 1

b. Debit to Cash

Explanation:

when cash is borrowed, the company recognizes an asset in form of cash however, this same transaction gives rise to a liability (a present obligation as a result of a past event) as the cash will be paid back later.

Hence the company debits cash and credits a loan account with the amount borrowed.