Answer :
The debit Cash is $38,400 and cash credit is $38,400.
The money the business got from the bond is a liability. Since currency is an asset with a debit nature and is received against a liability, we debited the cash account to increase the cash amount. On the other hand, because liability has a credit element, we have credited the note payable account in order to record the responsibility.
What is Cash Credit?
- As opposed to individual consumers, corporations are frequently provided cash credit. Financial organizations like banks and credit unions typically demand that a business customer deposit some sort of security as collateral in exchange for cash.
- This security could be a physical asset like stock or real estate. A percentage of the amount of the collateralized security often makes up the credit limit granted on the cash credit account.
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Question:
Kelly Jones and Tami Crawford borrowed $38,400 on a 7-month, 5% note from Gem State Bank to open their business, Blossoma’s Coffee House. The money was borrowed on June 1, 2022, and the note matures January 1, 2023. (a) Prepare the entry to record the receipt of the funds from the loan. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)