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 the correct journal entry for Fantastic Tea receiving $3,000 cash from Don Smith in exchange for common stock on December 1?

Debit Common Stock $3,000; Credit Cash $3,000

Debit Cash $3,000; Credit Common Stock $3,000

Debit Accounts Receivable $3,000; Credit Common Stock $3,000

Debit Cash $3,000; Credit Revenue $3,000

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Verified step by step guidance

Understand the transaction: Fantastic Tea is receiving $3,000 cash from Don Smith in exchange for common stock. This means the company is issuing equity (common stock) and receiving cash, which affects the Cash account and the Common Stock account.

Identify the accounts involved: The Cash account increases because the company is receiving cash, and the Common Stock account increases because equity is being issued.

Determine the type of accounts: Cash is an asset account, and Common Stock is an equity account. An increase in assets is recorded as a debit, and an increase in equity is recorded as a credit.

Apply the journal entry rules: Debit the Cash account for $3,000 to reflect the increase in assets, and credit the Common Stock account for $3,000 to reflect the increase in equity.

Write the journal entry: The correct journal entry is 'Debit Cash $3,000; Credit Common Stock $3,000'. This reflects the receipt of cash and issuance of common stock.