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

Why are there two account titles in the amount column of the purchases journal?

To list the supplier's name and the invoice number for reference.

To indicate the quantity and price of items purchased.

To separate cash purchases from credit purchases in the journal.

To record both the account being debited and the account being credited for each purchase transaction.

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Verified step by step guidance

Understand the purpose of the purchases journal: It is a specialized journal used to record credit purchases of inventory or goods. Each transaction involves two accounts: the account being debited and the account being credited.

Recognize the double-entry accounting principle: Every transaction must have equal debits and credits to maintain the accounting equation (Assets = Liabilities + Equity). This principle ensures accurate financial records.

Identify the accounts involved in a purchase transaction: When goods are purchased on credit, the inventory account (or purchases account) is debited to reflect the increase in assets, and the accounts payable account is credited to record the liability owed to the supplier.

Understand why two account titles are listed: The purchases journal includes both the account being debited (e.g., inventory or purchases) and the account being credited (e.g., accounts payable) to clearly document the transaction and ensure proper bookkeeping.

Recognize the importance of this format: Listing both accounts in the purchases journal provides clarity and ensures that the transaction is accurately recorded in the general ledger, supporting the integrity of financial statements.