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

When recording a sale of patio furniture for cash in the Patio & Furniture department, which of the following is the correct journal entry?

Debit Sales Revenue; Credit Cash

Debit Cash; Credit Sales Revenue

Debit Accounts Receivable; Credit Inventory

Debit Inventory; Credit Cash

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Verified step by step guidance

Understand the nature of the transaction: The sale of patio furniture for cash involves receiving cash and recognizing revenue from the sale. This is a cash transaction, not a credit transaction.

Identify the accounts affected: The accounts involved are 'Cash' (an asset account) and 'Sales Revenue' (a revenue account). Cash increases because the business receives money, and Sales Revenue increases because the business earns revenue from the sale.

Determine the accounting rule: According to the double-entry accounting system, every transaction affects at least two accounts. Assets (like Cash) increase with a debit, and revenues (like Sales Revenue) increase with a credit.

Apply the journal entry format: Debit the 'Cash' account to reflect the increase in assets, and credit the 'Sales Revenue' account to reflect the increase in revenue.

Review the incorrect options: The other options involve accounts like 'Accounts Receivable' and 'Inventory,' which are not relevant for a cash sale. 'Accounts Receivable' is used for credit sales, and 'Inventory' is adjusted when goods are sold but not directly credited in this case.