A Florida contractor pays $19,500 cash for small tools that are recorded directly as an expense. What is the immediate effect on cash?
Correct Answer
D) Decrease $19,500
A cash purchase decreases cash by the amount paid.
Why This Is the Correct Answer
A cash purchase decreases cash by the amount paid.
Why the Other Options Are Wrong
Option A: Increase $19,500
Increase $19,500 is not aligned with the supported result for cash disbursement; it has the wrong label or classification even if the number looks close.
Option B: No change
No change puts the item in the wrong financial bucket, timing, base, or comparison for cash disbursement.
Option C: Decrease $9,750
Decrease $9,750 is below the supported result for cash disbursement; it likely uses the wrong base, period, or account bucket.
Memory Technique
Cash Disbursement drawer for Bookkeeper Records: label purchase before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Two, Check Writing and Recording, Check Writing and Recording; use the job ledger figures in the stem and recompute the same accounting measure.
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