Table of contents

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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

Why is it important that the debit and credit amounts in a journal entry are equal?

To record only cash transactions

To increase the company's net income

To avoid paying taxes on revenue

To ensure the accounting equation remains balanced

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Verified step by step guidance

Understand the fundamental principle of double-entry accounting: every transaction affects at least two accounts, and the total debits must equal the total credits.

Recall the accounting equation: Assets = Liabilities + Equity. This equation must remain balanced for accurate financial reporting.

Recognize that journal entries are the mechanism used to record transactions in the accounting system, ensuring that the accounting equation is maintained.

Learn that if the debit and credit amounts in a journal entry are not equal, it would result in an imbalance in the accounting equation, leading to errors in financial statements.

Understand that ensuring debits equal credits in journal entries is crucial for maintaining the integrity of the financial records and providing accurate information for decision-making.