The cash sale on Monday increases which accounts?

• A. Cash and Revenue
• B. Inventory and Revenue
• C. Cash and Liabilities
• D. Cash and Expenses

Answer: (A)

When a cash sale happens, two accounts are affected: Cash and Revenue. Receiving cash increases your cash balance, which is an asset, and in double-entry accounting assets rise with a debit. Revenue represents income from selling goods, and it increases owners’ equity, so it is recorded as a credit. So the journal entry is a debit to Cash and a credit to Revenue.

The other options don’t fit because they suggest increases in accounts that aren’t affected by a straightforward cash sale. Inventory wouldn’t increase from a sale (it would decrease or be offset by recording cost of goods sold in a more complete entry), liabilities aren’t impacted by the sale itself, and Expenses don’t rise from the sale unless you separately record the cost of goods sold as an expense—the revenue from the sale is the primary increase.