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

Which of the following best describes the effect of recording a $5,000 cash sale on a company's journal entries?

Debit Cash $5,000; Credit Sales Revenue $5,000

Debit Sales Revenue $5,000; Credit Cash $5,000

Debit Cash $5,000; Credit Accounts Receivable $5,000

Debit Accounts Receivable $5,000; Credit Sales Revenue $5,000

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Verified step by step guidance

Step 1: Understand the nature of the transaction. A cash sale means the company receives cash immediately in exchange for goods or services provided. This impacts both the Cash account and the Sales Revenue account.

Step 2: Recall the rules of debits and credits. An increase in assets (like Cash) is recorded as a debit, while an increase in revenue (like Sales Revenue) is recorded as a credit.

Step 3: Identify the accounts involved. In this case, the accounts are 'Cash' (an asset account) and 'Sales Revenue' (a revenue account).

Step 4: Determine the correct journal entry. Since Cash is increasing, it will be debited for $5,000. Since Sales Revenue is increasing, it will be credited for $5,000.

Step 5: Compare the options provided in the problem. The correct journal entry is 'Debit Cash $5,000; Credit Sales Revenue $5,000,' as it reflects the increase in both Cash and Sales Revenue due to the cash sale.