Debits and Credits (Appendix)

The new bookkeeper for Darby Corporation is getting ready to mail the daily cash receipts to the bank for deposit. Because his previous job was at a bank, he is aware that the bank “credits” an account for all deposits and “debits” an account for all checks written.

Therefore, he makes the following entry before sending the daily receipts to the bank:

June 5 Accounts Receivable 10,000 Sales Revenue 2,450 Cash 12,450 To record cash received on June 5: $10,000 collections on account and $2,450 in cash sales.

Required Explain why that entry is wrong and prepare the correct journal entry. Why does the bank refer to cash received from a customer as a credit to that customer’s account?

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