Question

a business paid $2,500 on account. the journal entry would: a. debit accounts receivable for $2,500 and credit revenue for $2,500. b. debit cash for $2,500 and credit accounts payable for $2,500. c. debit accounts payable for $2,500 and credit cash for $2,500. d. debit cash for $2,500 and credit retained earnings for $2,500.

Explanation:

Step1: Understand the transaction

The business is making a payment on account. This means it is reducing its liability (Accounts Payable) and using cash to do so.

Step2: Apply accounting rules

Debit the account that decreases (Accounts Payable) and credit the account that is being used to pay (Cash).

Answer:

C. debit Accounts Payable for $2,500 and credit Cash for $2,500.