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

Vail Company recorded the following transactions during November:1. Purchased inventory on account for $5,000.2. Paid $2,000 cash to a supplier for a previous purchase.3. Sold goods to customers for $7,000 on account.Which of the following journal entries correctly records the sale of goods to customers on account?

Debit Cash $7,000; Credit Sales Revenue $7,000

Debit Inventory $7,000; Credit Accounts Payable $7,000

Debit Sales Revenue $7,000; Credit Accounts Receivable $7,000

Debit Accounts Receivable $7,000; Credit Sales Revenue $7,000

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Verified step by step guidance

Step 1: Understand the nature of the transaction. The sale of goods to customers on account means that the company has sold goods but has not yet received cash. Instead, the customers owe the company money, which is recorded as Accounts Receivable.

Step 2: Identify the accounts involved. For this transaction, the two accounts affected are 'Accounts Receivable' (an asset account) and 'Sales Revenue' (a revenue account).

Step 3: Determine the impact on each account. Since the company is earning revenue, 'Sales Revenue' will be credited to increase it. 'Accounts Receivable' will be debited to reflect the amount owed by customers, increasing the asset.

Step 4: Write the journal entry. The correct journal entry for this transaction is: Debit Accounts Receivable $7,000; Credit Sales Revenue $7,000.

Step 5: Verify the journal entry. Ensure that the debit and credit amounts are equal, and confirm that the accounts used align with the nature of the transaction (sale on account). This ensures the accounting equation remains balanced.