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 recording a journal entry for the purchase of inventory on account, which of the following accounts is debited to display the total for the quantity (cost) acquired?

Accounts Payable

Inventory

Sales Revenue

Cash

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Verified step by step guidance

Understand the nature of the transaction: The purchase of inventory on account means the company is acquiring inventory but has not yet paid for it. This creates a liability (Accounts Payable) and increases the asset (Inventory).

Identify the accounts involved: The two accounts affected are 'Inventory' (an asset account) and 'Accounts Payable' (a liability account).

Determine the impact on the accounts: The Inventory account will increase because the company is acquiring more inventory, and the Accounts Payable account will increase because the company owes money for the purchase.

Apply the rules of debits and credits: In accounting, assets increase with debits and liabilities increase with credits. Therefore, the Inventory account will be debited, and the Accounts Payable account will be credited.

Record the journal entry: The journal entry will be structured as follows: Debit the Inventory account to reflect the increase in assets, and Credit the Accounts Payable account to reflect the increase in liabilities.