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 is the correct journal entry to record the payment of a $200 electricity invoice on December 31, which was previously recorded as an account payable in November?

Debit Utilities Expense $200; Credit Accounts Payable $200

Debit Utilities Expense $200; Credit Cash $200

Debit Cash $200; Credit Utilities Expense $200

Debit Accounts Payable $200; Credit Cash $200

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Verified step by step guidance

Step 1: Understand the context of the transaction. The electricity invoice was recorded as an account payable in November, meaning the expense was already recognized in the prior period, and the liability (Accounts Payable) was created to reflect the obligation to pay.

Step 2: Identify the accounts involved in the payment transaction. Since the invoice is being paid, the Accounts Payable account will be debited to reduce the liability, and the Cash account will be credited to reflect the outflow of cash.

Step 3: Recall the journal entry format. A debit entry increases assets or decreases liabilities, while a credit entry decreases assets or increases liabilities. In this case, debiting Accounts Payable reduces the liability, and crediting Cash decreases the asset.

Step 4: Write the journal entry. The correct journal entry is: Debit Accounts Payable $200; Credit Cash $200. This reflects the payment of the liability using cash.

Step 5: Verify the logic of the entry. Ensure that the liability is reduced appropriately and the cash outflow is recorded accurately. Since the Utilities Expense was already recorded in November, it is not part of this transaction.