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

Kwon Manufacturing began operations this month. It purchased equipment for $10,000 cash, issued $20,000 of common stock for cash, and paid $2,000 for rent. Which of the following is the correct journal entry for the purchase of equipment?

Debit Rent Expense $10,000; Credit Cash $10,000

Debit Cash $10,000; Credit Equipment $10,000

Debit Equipment $10,000; Credit Common Stock $10,000

Debit Equipment $10,000; Credit Cash $10,000

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Verified step by step guidance

Step 1: Understand the transaction. Kwon Manufacturing purchased equipment for $10,000 cash. This means the company is acquiring an asset (equipment) and reducing another asset (cash).

Step 2: Recall the accounting equation: Assets = Liabilities + Equity. Purchasing equipment affects the 'Assets' section by increasing equipment and decreasing cash, with no impact on liabilities or equity.

Step 3: Determine the correct accounts to use. The equipment account is debited because it represents an increase in assets, and the cash account is credited because it represents a decrease in assets.

Step 4: Write the journal entry. The format for journal entries is: Debit the account being increased (Equipment) and Credit the account being decreased (Cash).

Step 5: Verify the journal entry. The correct journal entry is: Debit Equipment $10,000; Credit Cash $10,000. This reflects the increase in equipment and the decrease in cash accurately.