Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Which of the following best describes the journal entry to record the purchase of materials on account in process cost accounting?

Debit Work in Process Inventory; Credit Cash

Debit Accounts Payable; Credit Raw Materials Inventory

Debit Raw Materials Inventory; Credit Accounts Payable

Debit Finished Goods Inventory; Credit Accounts Payable

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Verified step by step guidance

Understand the context: In process cost accounting, when materials are purchased on account, it means the company is acquiring raw materials but has not yet paid for them. This transaction needs to be recorded in the journal.

Identify the accounts involved: The purchase of materials affects the 'Raw Materials Inventory' account (an asset account) and the 'Accounts Payable' account (a liability account).

Determine the nature of the transaction: Since the company is increasing its inventory of raw materials, the 'Raw Materials Inventory' account will be debited. Conversely, because the company owes money for the purchase, the 'Accounts Payable' account will be credited.

Write the journal entry: The journal entry for this transaction will be: Debit 'Raw Materials Inventory' and Credit 'Accounts Payable'. This reflects the increase in inventory and the obligation to pay for the materials.

Review the options provided: Compare the journal entry you determined with the options given in the problem. The correct answer is 'Debit Raw Materials Inventory; Credit Accounts Payable', as it accurately reflects the transaction.