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. Johnson paid his lunch bill of \$29.90 in cash. Which of the following is the correct journal entry to record this transaction?

Debit: Meals Expense \$29.90; Credit: Cash \$29.90

Debit: Meals Expense \$29.90; Credit: Accounts Receivable \$29.90

Debit: Cash \$29.90; Credit: Meals Expense \$29.90

Debit: Accounts Payable \$29.90; Credit: Cash \$29.90

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Verified step by step guidance

Step 1: Understand the nature of the transaction. Mr. Johnson paid his lunch bill in cash, which means there is an expense incurred (Meals Expense) and cash is used to settle the payment.

Step 2: Recall the basic accounting principle of double-entry bookkeeping. Every transaction affects at least two accounts, one with a debit entry and the other with a credit entry.

Step 3: Identify the accounts involved. In this case, the accounts are 'Meals Expense' (an expense account) and 'Cash' (an asset account).

Step 4: Determine the impact on each account. Since Mr. Johnson incurred an expense, 'Meals Expense' should be debited to reflect the increase in expenses. 'Cash' should be credited to show the decrease in cash as it was used to pay the bill.

Step 5: Write the journal entry. The correct journal entry is: Debit 'Meals Expense' for $29.90 and Credit 'Cash' for $29.90. This reflects the payment of the lunch bill in cash and the corresponding increase in expenses.