Question
When Prana was entering transaction in her journal she credited an asset account and debited a liability account. What will be the result of this action?
Question 6 options:
The company will appear to have additional cash.
The company will appear to have less cash.
The accounts will stay in balance.
It will be double-counted.
Question 6 options:
The company will appear to have additional cash.
The company will appear to have less cash.
The accounts will stay in balance.
It will be double-counted.
Answers
GPT-4o mini
When Prana credited an asset account and debited a liability account, the accounts will still be in balance because accounting is based on the double-entry system, where every debit entry must have a corresponding credit entry.
Here's a breakdown of the options:
1. **The company will appear to have additional cash.** - Incorrect, because crediting an asset account typically reduces that asset, which does not imply additional cash.
2. **The company will appear to have less cash.** - Incorrect, as it may depend on which asset account is credited. If cash is credited, this would reduce cash, but if another asset is credited, the cash situation could be unaffected.
3. **The accounts will stay in balance.** - Correct. Since both a debit and a credit have been made, the accounting equation (Assets = Liabilities + Equity) remains in balance.
4. **It will be double-counted.** - Incorrect, as the transaction doesn’t indicate a double-counting situation.
Therefore, the correct answer is:
**The accounts will stay in balance.**
Here's a breakdown of the options:
1. **The company will appear to have additional cash.** - Incorrect, because crediting an asset account typically reduces that asset, which does not imply additional cash.
2. **The company will appear to have less cash.** - Incorrect, as it may depend on which asset account is credited. If cash is credited, this would reduce cash, but if another asset is credited, the cash situation could be unaffected.
3. **The accounts will stay in balance.** - Correct. Since both a debit and a credit have been made, the accounting equation (Assets = Liabilities + Equity) remains in balance.
4. **It will be double-counted.** - Incorrect, as the transaction doesn’t indicate a double-counting situation.
Therefore, the correct answer is:
**The accounts will stay in balance.**