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 situations would require you to debit a contra asset account?

Recording the write-off of an uncollectible account receivable using the allowance method

Recognizing depreciation expense for the period

Purchasing new equipment for cash

Receiving payment from a customer on account

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Verified step by step guidance

Understand the concept of a contra asset account: A contra asset account is used to reduce the value of a related asset account. Common examples include Allowance for Doubtful Accounts (related to Accounts Receivable) and Accumulated Depreciation (related to fixed assets).

Analyze the first option: 'Recording the write-off of an uncollectible account receivable using the allowance method.' When using the allowance method, the write-off of an uncollectible account involves debiting the Allowance for Doubtful Accounts (a contra asset account) and crediting Accounts Receivable. This reduces both the allowance and the accounts receivable balance.

Analyze the second option: 'Recognizing depreciation expense for the period.' Depreciation expense is recorded by debiting Depreciation Expense and crediting Accumulated Depreciation (a contra asset account). This does involve a contra asset account, but the account is credited, not debited.

Analyze the third option: 'Purchasing new equipment for cash.' This transaction involves debiting Equipment (an asset account) and crediting Cash (another asset account). No contra asset account is involved in this transaction.

Analyze the fourth option: 'Receiving payment from a customer on account.' This transaction involves debiting Cash and crediting Accounts Receivable. No contra asset account is involved in this transaction.