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 best describes the effect of recording a cash sale on the journal entries using debits and credits?

Debit Sales Revenue; Credit Accounts Receivable

Debit Accounts Receivable; Credit Cash

Debit Sales Revenue; Credit Cash

Debit Cash; Credit Sales Revenue

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Verified step by step guidance

Understand the nature of the transaction: A cash sale means the business receives cash immediately in exchange for goods or services provided. This impacts both the Cash account and the Sales Revenue account.

Recall the rules of debits and credits: Assets (like Cash) increase with a debit, while revenues (like Sales Revenue) increase with a credit.

Identify the accounts involved: The Cash account will be debited because cash is increasing, and the Sales Revenue account will be credited because revenue is being recognized.

Write the journal entry: Debit the Cash account to reflect the increase in cash received, and Credit the Sales Revenue account to record the revenue earned from the sale.

Verify the logic: Ensure that the journal entry aligns with the accounting equation (Assets = Liabilities + Equity) and the rules of debits and credits. In this case, the increase in Cash (Asset) and Sales Revenue (Equity) is correctly recorded.