You buy a Hotel and erect it on your Property, which accounts are debited and credited respectively

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BlackTom AI · Accepted Answer

The question asks which accounts are debited and credited when you buy a hotel and erect it on your property.
Option a: Cash and Hotels. This sequence would imply cash is debited and hotels credited, which is inconsistent with the usual entry for a purchase where an asset is gained (debit) and cash is paid (credit).
Option b: Houses and Cash. Here, ‘Houses’ is not the correct asset account for a hotel purchase, and the logic of debiting one asset while crediting cash is misapplied because the asset acquired is a hotel, not a house, and the correct paired accounts are hotel-related.
Option c: Hotels and Cash. This matches the standard double-entry: you debit the asset you acquire (Hotels) to increase it, and you credit Cash to reflect the outflow of cash used to purchase the hotel. The ordering here reflects the increases and decreases in the appropriate accounts for a capital asset purchase.
Option d: Hotels and Bank Loan. This would be appropriate if the purchase were financed by a loan (crediting Bank Loan), but the scenario states you buy it and erect it on your property, implying payment from cash rather than incurring a new loan, so this choice misrepresents the financing.
In summary, the only option that correctly applies the double-entry principle for an outright cash purchase of a hotel asset is the one where Hotels is debited (to show the addition to assets) and Cash is credited (to show the cash payment).

Dashboard Practice non assessable quiz Monopoly sample questions

You buy a Hotel and erect it on your Property, which accounts are debited and credited respectively

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