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 reallocating a transaction among multiple accounting codes, which of the following best describes the correct journal entry process?

Debit all accounts involved in the reallocation.

Debit the original account and credit the new accounts for the reallocated amounts.

Credit all accounts involved in the reallocation.

Credit the original account and debit the new accounts for the reallocated amounts.

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Verified step by step guidance

Understand the concept of reallocation: Reallocation involves transferring amounts from one account to another to reflect the correct allocation of expenses or revenues. This process ensures accurate financial reporting.

Recall the basic accounting equation: Assets = Liabilities + Equity. In journal entries, debits increase assets or expenses, while credits increase liabilities, equity, or revenue. This principle will guide the reallocation process.

Identify the original account and the new accounts: The original account is the one from which the amount is being removed (credited), and the new accounts are the ones receiving the reallocated amounts (debited).

Record the journal entry: Credit the original account to reduce its balance and debit the new accounts to increase their balances. This ensures the total debits equal the total credits, maintaining the balance in the accounting equation.

Verify the reallocation: Double-check the amounts and accounts involved to ensure the reallocation is accurate and aligns with the organization's financial policies.