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

In a process costing system, direct material costs incurred are recorded:

As a credit to the Raw Materials account

As a debit to the Work in Process account

As a debit to the Finished Goods account

As a credit to the Work in Process account

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Verified step by step guidance

Understand the concept of process costing: Process costing is a method used in manufacturing where costs are assigned to processes or departments rather than individual products. Direct material costs are incurred during production and need to be allocated appropriately.

Review the flow of costs in a manufacturing process: Costs typically flow from the Raw Materials account to the Work in Process (WIP) account as materials are used in production. Once production is complete, costs move from WIP to Finished Goods and eventually to Cost of Goods Sold when products are sold.

Analyze the role of direct materials: Direct materials are the raw materials directly used in the production of goods. When these materials are consumed in production, their cost is transferred from the Raw Materials account to the Work in Process account.

Determine the correct journal entry: When direct materials are used in production, the accounting entry involves debiting the Work in Process account (to increase the cost of production) and crediting the Raw Materials account (to decrease the inventory of raw materials).

Verify the correct answer: Based on the explanation above, direct material costs incurred are recorded as a debit to the Work in Process account, reflecting the consumption of materials in the production process.