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

When a purchase order is created, which account is typically debited in the accounting records?

Cash

Inventory

No account is debited at the time of purchase order creation

Accounts Payable

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Verified step by step guidance

Understand the nature of a purchase order: A purchase order is a document issued by a buyer to a seller, indicating the items, quantities, and agreed prices for products or services. It is not a financial transaction but rather a commitment to purchase.

Recognize the accounting principle: At the time of creating a purchase order, no financial transaction has occurred yet. Therefore, no accounts are debited or credited in the accounting records.

Distinguish between a purchase order and an invoice: A purchase order is a preliminary document, while an invoice is issued by the seller after the goods or services are delivered, triggering a financial transaction.

Identify when accounts are affected: Accounts such as Inventory, Accounts Payable, or Cash are affected only when the goods or services are received, and the invoice is recorded in the accounting system.

Conclude that no account is debited at the time of purchase order creation: The purchase order is simply a commitment and does not impact the accounting records until the transaction is finalized.