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

Mr. Russo exchanged €200 for U.S. dollars to deposit into his company's bank account. Which of the following is the correct journal entry to record this transaction in the company's accounting records?

Debit: Bank Fees €200; Credit: Cash (USD) €200

Debit: Cash (USD) €200; Credit: Foreign Currency (EUR) €200

Debit: Cash (USD) €200; Credit: Revenue €200

Debit: Foreign Currency (EUR) €200; Credit: Cash (USD) €200

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Verified step by step guidance

Step 1: Understand the nature of the transaction. Mr. Russo exchanged €200 for U.S. dollars to deposit into his company's bank account. This involves converting one currency (EUR) into another (USD) and recording the transaction in the company's accounting records.

Step 2: Identify the accounts involved. The transaction affects the 'Cash (USD)' account, which increases because U.S. dollars are being deposited, and the 'Foreign Currency (EUR)' account, which decreases because euros are being exchanged.

Step 3: Determine the correct journal entry format. In accounting, a debit entry is used to record an increase in assets, while a credit entry is used to record a decrease in assets. Since 'Cash (USD)' is increasing, it will be debited, and since 'Foreign Currency (EUR)' is decreasing, it will be credited.

Step 4: Write the journal entry. The correct journal entry is: Debit 'Cash (USD)' €200 and Credit 'Foreign Currency (EUR)' €200. This reflects the increase in U.S. dollars and the decrease in euros.

Step 5: Verify the journal entry against the options provided. The correct answer matches the journal entry format: Debit 'Cash (USD)' €200; Credit 'Foreign Currency (EUR)' €200.