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

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?

Debit Office Supplies $2,000; Credit Accounts Payable $2,000

Debit Accounts Payable $2,000; Credit Office Supplies $2,000

Debit Cash $2,000; Credit Office Supplies $2,000

Debit Office Supplies $2,000; Credit Cash $2,000

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Verified step by step guidance

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.