Accounting Fundamentals Certification (AFC) 2025 – 400 Free Practice Questions to Pass the Exam

The correct entry to show an increase in cash from sales is to debit Cash and credit Sales Revenue. When cash is received from sales, it indicates that the business has made a sale and received payment for it, leading to an increase in cash on hand.

Debiting Cash reflects the increase in the asset account for cash, which is the result of the transaction. On the other hand, crediting Sales Revenue recognizes the revenue earned from the sale, reflecting the business's engagement in its operations and acknowledging that a sale has taken place. This alignment of debits and credits ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced, as the increase in one asset (cash) corresponds to an increase in equity (through revenues).

The other options suggest different interactions that do not correctly reflect the process of cash generation from sales. For instance, crediting Cash or debiting Sales Revenue would not accurately represent an increase in cash from sales. Instead, the correct transaction highlights the relationship between cash received and the earning of revenue effectively.