What is the entry for receiving a short-term loan?

When a business receives a short-term loan, it results in an increase in cash and creates a liability that reflects the obligation to repay the loan. The correct journal entry involves debiting the Cash account because the business is receiving cash from the lender, which enhances its current assets. Simultaneously, the business incurs a liability; hence, it must credit the Note Payable account. This credit signifies the amount that the business is now responsible for repaying in the future.

In this context, it's essential to understand the accounting principles that govern these transactions. Debiting Cash increases the asset balance, reflecting the inflow of cash, while crediting the Note Payable increases the liability balance, which records the commitment to pay back the loan amount.

The other answer choices illustrate different transactions that do not align with the process of receiving a loan. For instance, debiting Loan Receivable and crediting Cash suggests that the business is lending money, not borrowing it. Debiting Note Payable and crediting Cash would indicate that a payment is being made on an existing loan rather than taking on a new loan. Lastly, debiting Cash and crediting Interest Payable would apply to recording accrued interest rather than the initial loan transaction. Therefore, the correct understanding of