Multiple Choice
If a company purchases office supplies for \$500 cash, which of the following journal entries correctly records the transaction?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following is the correct journal entry to record the purchase of a cow for \$800 in cash?
A
Debit Livestock \$800; Credit Cash \$800
B
Debit Cash \$800; Credit Livestock \$800
C
Debit Livestock \$800; Credit Accounts Payable \$800
D
Debit Expense \$800; Credit Cash \$800
Verified step by step guidance1
Understand the nature of the transaction: The purchase of a cow is an asset acquisition, specifically classified as 'Livestock,' and it is paid for in cash. This means the transaction involves increasing an asset account (Livestock) and decreasing another asset account (Cash).
Recall the rules of debit and credit: Assets increase with a debit and decrease with a credit. Since Livestock is increasing, it will be debited, and since Cash is decreasing, it will be credited.
Analyze the options provided: The correct journal entry should reflect a debit to Livestock for \$800 and a credit to Cash for \$800, as this matches the nature of the transaction.
Eliminate incorrect options: Review each option carefully. For example, 'Debit Cash \$800; Credit Livestock \$800' is incorrect because Cash is decreasing, not increasing. Similarly, 'Debit Livestock \$800; Credit Accounts Payable \$800' is incorrect because the payment was made in cash, not on credit. 'Debit Expense \$800; Credit Cash \$800' is also incorrect because the cow is an asset, not an expense.
Select the correct journal entry: Based on the analysis, the correct journal entry is 'Debit Livestock \$800; Credit Cash \$800,' as it accurately reflects the increase in the Livestock asset and the decrease in Cash.
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