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 is NOT a possible journal entry according to the rules of debits and credits?

Debit Equipment $2,000; Debit Supplies $500; Credit Cash $2,500

Debit Cash $1,000; Credit Revenue $1,000

Debit Accounts Payable $500; Credit Inventory $500

Debit Service Revenue $800; Credit Service Revenue $800

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Verified step by step guidance

Step 1: Understand the rules of debits and credits. Debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts. Debits and credits must always balance in a journal entry.

Step 2: Analyze the first journal entry: Debit Equipment $2,000; Debit Supplies $500; Credit Cash $2,500. This entry is valid because the total debits ($2,000 + $500 = $2,500) equal the total credits ($2,500).

Step 3: Analyze the second journal entry: Debit Cash $1,000; Credit Revenue $1,000. This entry is valid because the debit to Cash (an asset account) and the credit to Revenue (a revenue account) are equal, maintaining balance.

Step 4: Analyze the third journal entry: Debit Accounts Payable $500; Credit Inventory $500. This entry is valid because it decreases a liability account (Accounts Payable) and decreases an asset account (Inventory) by the same amount, maintaining balance.

Step 5: Analyze the fourth journal entry: Debit Service Revenue $800; Credit Service Revenue $800. This entry is NOT valid because Service Revenue is a revenue account, and it cannot be both debited and credited in the same transaction. This violates the rules of debits and credits.