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

Which of the following best describes how to record a transaction in the general journal when a company receives cash from a customer for a previous credit sale?

Debit Cash; Credit Accounts Receivable

Debit Cash; Credit Sales Revenue

Debit Accounts Receivable; Credit Cash

Debit Sales Revenue; Credit Cash

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Verified step by step guidance

Understand the nature of the transaction: The company is receiving cash from a customer for a previous credit sale. This means the company had already recorded the sale earlier and recognized Accounts Receivable as the amount owed by the customer.

Identify the accounts involved: When cash is received, the Cash account increases, and the Accounts Receivable account decreases because the customer has paid off their debt.

Determine the type of accounts: Cash is an asset account, and Accounts Receivable is also an asset account. An increase in Cash is recorded as a debit, while a decrease in Accounts Receivable is recorded as a credit.

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 Cash and Credit Accounts Receivable.

Record the transaction in the general journal: The journal entry would be formatted as follows: Debit Cash (to increase the asset account) and Credit Accounts Receivable (to decrease the asset account). This reflects the receipt of cash and the reduction of the customer's outstanding balance.