Multiple Choice
If you use a transaction scan device or another form of documentation to record a sale of merchandise for cash, which journal entry should be made?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
On July 1, a company receives an invoice for \$2,000 for office supplies purchased on account. Which of the following is the correct journal entry to record this transaction?
A
Debit Office Supplies \$2,000; Credit Accounts Payable \$2,000
B
Debit Accounts Payable \$2,000; Credit Office Supplies \$2,000
C
Debit Cash \$2,000; Credit Office Supplies \$2,000
D
Debit Office Supplies \$2,000; Credit Cash \$2,000
Verified step by step guidance1
Step 1: Understand the nature of the transaction. The company has purchased office supplies on account, meaning it has not paid cash but has incurred a liability (Accounts Payable). This is important for determining the correct accounts to debit and credit.
Step 2: Identify the accounts involved. Office Supplies is an asset account because it represents items that will be used in the business. Accounts Payable is a liability account because it represents an obligation to pay in the future.
Step 3: Determine the impact on each account. The purchase of office supplies increases the asset (Office Supplies), so it should be debited. The liability (Accounts Payable) increases because the company owes money, so it should be credited.
Step 4: Apply the double-entry accounting principle. For every transaction, there must be at least one debit and one credit of equal amounts. In this case, Debit Office Supplies \$2,000 and Credit Accounts Payable \$2,000.
Step 5: Verify the journal entry. Ensure that the debit and credit amounts are equal and that the accounts used accurately reflect the transaction. The correct journal entry is: Debit Office Supplies \$2,000; Credit Accounts Payable \$2,000.
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