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 computations for journal entries is correctly stated?

When a company borrows $10,000 from the bank, debit Notes Payable $10,000 and credit Cash $10,000.

When a company receives $2,000 from a customer for services performed, debit Service Revenue $2,000 and credit Cash $2,000.

When a company pays rent expense of $1,200, debit Rent Expense $1,200 and credit Accounts Receivable $1,200.

When a company purchases equipment for $5,000 cash, debit Equipment $5,000 and credit Cash $5,000.

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Verified step by step guidance

Step 1: Understand the basic rules of journal entries. In accounting, every transaction affects at least two accounts and follows the double-entry system, meaning one account is debited and another is credited. Debits and credits must always balance.

Step 2: Analyze each transaction provided in the problem. For example, when a company borrows $10,000 from the bank, the correct journal entry would be to debit Cash (an asset account) and credit Notes Payable (a liability account). The problem incorrectly states to debit Notes Payable and credit Cash.

Step 3: Evaluate the second transaction. When a company receives $2,000 from a customer for services performed, the correct journal entry would be to debit Cash (an asset account) and credit Service Revenue (a revenue account). The problem incorrectly states to debit Service Revenue and credit Cash.

Step 4: Review the third transaction. When a company pays rent expense of $1,200, the correct journal entry would be to debit Rent Expense (an expense account) and credit Cash (an asset account). The problem incorrectly states to credit Accounts Receivable, which is unrelated to this transaction.

Step 5: Confirm the correct journal entry for the fourth transaction. When a company purchases equipment for $5,000 cash, the correct journal entry is to debit Equipment (an asset account) and credit Cash (an asset account). This matches the correct answer provided in the problem.