Florida General Contractor Practice Exam

In a double entry bookkeeping system, what action must be taken to increase the cash account?

1. Debit the amount

2. Credit the amount

3. Close the account

4. Reconcile the account

The correct answer is: Debit the amount

In a double-entry bookkeeping system, increasing the cash account requires a debit entry. This system operates on the fundamental principle that for every financial transaction, there are equal and opposite effects in at least two different accounts. Assets, which include cash, are increased by debits. Therefore, when you want to increase the cash account, you would record a debit. Each account in this system has a normal balance, and for asset accounts like cash, the normal balance is a debit. Thus, when cash is received (which is an increase in cash), it is recorded as a debit to the cash account to reflect this increase accurately. This aligns with the accounting equation, where assets must always equal liabilities plus equity. Other actions listed, such as crediting the amount or closing the account, would not serve to increase the cash account. Crediting the cash account would actually decrease the cash balance, and closing or reconciling the account are tasks related to ending the accounting period or ensuring that balances match, not directly increasing an account balance.