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 preparing a journal entry, which of the following statements is correct regarding the order of debits and credits?

Credits must be listed before debits.

Debits must be listed before credits.

Debits and credits can be listed in any order.

Only credits are listed in journal entries.

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Verified step by step guidance

Understand the purpose of a journal entry: A journal entry is used to record financial transactions in the accounting system, following the double-entry accounting principle where every transaction affects at least two accounts.

Recall the format of a journal entry: Journal entries consist of debits and credits, and they must always balance (i.e., the total debits must equal the total credits).

Learn the standard convention for listing debits and credits: In a journal entry, debits are always listed first, followed by credits. This is a universally accepted practice in accounting to maintain consistency and clarity.

Consider the reasoning behind the order: Listing debits first helps ensure that the reader can easily identify the accounts being debited before moving on to the accounts being credited, which aligns with the logical flow of recording transactions.

Apply this knowledge when preparing journal entries: Always list the debited accounts first, followed by the credited accounts, and ensure the amounts are properly aligned to maintain the balance between debits and credits.