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

In the context of journal entries, how is using a debit card similar to writing a check?

Both are recorded as credits to the cash account.

Both increase the owner's equity account.

Both decrease the cash account when used for a purchase.

Both increase the accounts receivable account.

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Verified step by step guidance

Understand the concept of journal entries: Journal entries are used to record financial transactions in the accounting system. Each transaction affects at least two accounts, following the double-entry accounting principle.

Recognize the nature of a debit card transaction: When a debit card is used for a purchase, it directly reduces the cash balance in the bank account, similar to writing a check.

Identify the impact on the cash account: Both debit card transactions and checks result in a decrease in the cash account because they represent payments made by the business.

Clarify why accounts receivable and owner's equity are not affected: Accounts receivable represents money owed to the business, which is not relevant in this context. Owner's equity is not directly impacted by these transactions unless they are part of a larger financial event.

Conclude that both debit card transactions and checks are recorded as credits to the cash account, reflecting the reduction in cash when used for purchases.