Questions: Fill in the Blank Question L. Lyons started a business and invested 4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be (debited/credited) on the (left/right) side of the T-account and the Common stock account would be (debited/credited) on the (left/right) side of the T-account.

Fill in the Blank Question L. Lyons started a business and invested 4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be (debited/credited) on the (left/right) side of the T-account and the Common stock account would be (debited/credited) on the (left/right) side of the T-account.
Transcript text: Fill in the Blank Question L. Lyons started a business and invested $\$ 4,000$ in exchange for common stock. Illustrate how to record the transaction in the $T$-accounts by completing the following sentence. The Cash account would be $\square$ (debited/credited) on the $\square$ (lefUright) side of the T-account and the Common stock account would be $\square$ (debited/credited) on the $\square$ (leffright) side of the $T$-account.
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Solution

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The Cash account would be debited on the left side of the T-account and the Common stock account would be credited on the right side of the T-account.

Explanation:

  1. When L. Lyons invests $4,000 in the business, the business receives cash, which increases the Cash account. In accounting, increases in asset accounts (like Cash) are recorded as debits.
  2. The Common stock account represents the equity of the business. When the business issues common stock, it increases the equity. In accounting, increases in equity accounts are recorded as credits.
  3. In a T-account, debits are recorded on the left side, and credits are recorded on the right side.
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