An amount paid in cash to John is Dr to John and Cr to
Answer Details
The transaction involves paying an amount in cash to John. In accounting terms, when a payment is made to a person or an entity, a debit and credit entry is recorded to keep the accounts balanced. Here's how it works in this scenario:
1. Debit (Dr) to John: Since the payment is being made to John, his account is debited. This is because John's account balance increases from the perspective of the payer's books (as they no longer owe that amount to John). Debiting his account shows a reduction of liability.
2. Credit (Cr) to Cash: The credit entry is made to the Cash account because when cash is paid out, it represents a decrease in the cash balance of the business or individual making the payment. This is why the Cash account is credited.
In summary, when an amount is paid in cash to John:
The entry would be: Dr John, because John is gaining more value in his account from the perspective of the payer.
The entry would be: Cr Cash, indicating that the payer's cash reserves have decreased as a result of the payment.
So, in this specific scenario, the correct credit entry is made to the Cash account.