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 a buyer purchases a cooperative and the sale is completed, which journal entry should the buyer record?

Debit Accounts Payable; Credit Investment in Cooperative

Debit Cash; Credit Investment in Cooperative

Debit Investment in Cooperative; Credit Cash

Debit Investment in Cooperative; Credit Revenue

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Verified step by step guidance

Understand the nature of the transaction: When a buyer purchases a cooperative, they are acquiring an investment. This means the buyer is increasing their asset account (Investment in Cooperative) and decreasing their cash account, as cash is used to pay for the purchase.

Identify the accounts involved: The two accounts affected are 'Investment in Cooperative' (an asset account) and 'Cash' (another asset account). The purchase increases the 'Investment in Cooperative' account and decreases the 'Cash' account.

Determine the journal entry format: In accounting, an increase in an asset account is recorded as a debit, while a decrease in an asset account is recorded as a credit. Therefore, 'Investment in Cooperative' will be debited, and 'Cash' will be credited.

Write the journal entry: The journal entry will be structured as follows: Debit 'Investment in Cooperative' and Credit 'Cash'. This reflects the increase in the investment and the decrease in cash.

Review the journal entry for accuracy: Ensure that the debit and credit amounts are equal, as every journal entry must balance. Confirm that the accounts used align with the nature of the transaction.