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
When a company purchases materials for use in production, which account is debited in the journal entry?
A
Accounts Payable
B
Cost of Goods Sold
C
Raw Materials Inventory
D
Work in Process Inventory
Verified step by step guidance1
Understand the nature of the transaction: When a company purchases materials for use in production, it is acquiring raw materials that will later be used in the manufacturing process. This transaction involves increasing the Raw Materials Inventory account.
Identify the accounts involved: The Raw Materials Inventory account is debited because the company is increasing its inventory of raw materials. The credit side of the journal entry typically involves Accounts Payable if the purchase is made on credit, or Cash if the purchase is made immediately.
Recall the journal entry format: A journal entry always includes a debit and a credit. In this case, the debit is to Raw Materials Inventory, and the credit is to Accounts Payable or Cash, depending on the payment method.
Understand why other accounts are not debited: Cost of Goods Sold is not debited because this account is used when materials are actually consumed in production and sold. Work in Process Inventory is not debited because this account is used when raw materials are transferred into production, not when they are initially purchased.
Write the journal entry: The journal entry for purchasing raw materials on credit would look like this: Debit Raw Materials Inventory and Credit Accounts Payable. If the purchase is made with cash, the credit would be to Cash instead of Accounts Payable.
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