Multiple Choice
When a company purchases equipment for \$5,000 cash, which of the following journal entries correctly records the transaction?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
When Portia creates an invoice in QuickBooks for a customer sale on account, which journal entry is recorded?
A
Debit Sales Revenue; Credit Accounts Receivable
B
Debit Accounts Receivable; Credit Sales Revenue
C
Debit Cash; Credit Sales Revenue
D
Debit Sales Revenue; Credit Cash
Verified step by step guidance1
Understand the nature of the transaction: Portia is creating an invoice for a customer sale on account. This means the customer has purchased goods or services but has not yet paid, creating an accounts receivable.
Identify the accounts involved: The two accounts affected are 'Accounts Receivable' (an asset account) and 'Sales Revenue' (a revenue account).
Determine the impact on Accounts Receivable: Since the customer owes money, Accounts Receivable increases. In accounting, an increase in an asset account is recorded as a debit.
Determine the impact on Sales Revenue: The sale generates revenue for the business. In accounting, an increase in a revenue account is recorded as a credit.
Record the journal entry: The journal entry for this transaction is 'Debit Accounts Receivable' and 'Credit Sales Revenue', reflecting the increase in assets and revenue.
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