Multiple Choice
Which of the following journal entries correctly records the payment of workshop costs in cash, assuming the costs were previously unrecorded?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following correctly matches the activity to its effect on the general ledger accounts?A company purchases office supplies for cash.
A
Debit Accounts Payable; Credit Supplies
B
Debit Cash; Credit Supplies
C
Debit Supplies Expense; Credit Accounts Payable
D
Debit Supplies; Credit Cash
Verified step by step guidance1
Step 1: Understand the transaction. The company is purchasing office supplies and paying for them in cash. This means the company is acquiring an asset (supplies) and reducing another asset (cash).
Step 2: Identify the accounts involved. The accounts affected are 'Supplies' (an asset account) and 'Cash' (another asset account).
Step 3: Determine the nature of the accounts. 'Supplies' will increase because the company is acquiring more supplies, and 'Cash' will decrease because the company is paying for the supplies.
Step 4: Apply the rules of debits and credits. In accounting, an increase in an asset account is recorded as a debit, and a decrease in an asset account is recorded as a credit. Therefore, 'Supplies' will be debited, and 'Cash' will be credited.
Step 5: Record the journal entry. The correct journal entry is: Debit 'Supplies' and Credit 'Cash'. This reflects the increase in supplies and the decrease in cash in the general ledger.
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