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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is the correct journal entry for the purchase of inventory on account using the perpetual inventory system?

Debit Accounts Payable; Credit Inventory

Debit Purchases; Credit Accounts Payable

Debit Inventory; Credit Accounts Payable

Debit Inventory; Credit Cash

Previous problemNext problem

Verified step by step guidance

Understand the perpetual inventory system: In this system, inventory is continuously updated to reflect purchases and sales. When inventory is purchased, it is recorded directly in the Inventory account rather than a Purchases account.

Identify the transaction type: The problem specifies that inventory is purchased on account, meaning the company has not paid cash but instead owes the supplier (Accounts Payable).

Determine the accounts involved: Since inventory is purchased, the Inventory account is debited to increase its balance. Accounts Payable is credited to reflect the liability incurred.

Apply the journal entry format: In a journal entry, debits are listed first, followed by credits. The correct entry for this transaction is: Debit Inventory; Credit Accounts Payable.

Review the options provided: Compare the correct journal entry to the options given in the problem. The correct answer matches 'Debit Inventory; Credit Accounts Payable'.