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

Li Company paid cash to purchase land. What is the correct effect of this transaction on Li Company's accounts?

Land is credited and Cash is debited.

Land is debited and Cash is credited.

Both Land and Cash are credited.

Both Land and Cash are debited.

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Verified step by step guidance

Understand the nature of the transaction: Li Company is purchasing land using cash. This is an exchange of one asset (cash) for another asset (land).

Recall the accounting principle of debits and credits: Debits increase asset accounts, while credits decrease asset accounts. Since land is being acquired, the Land account will increase, and since cash is being used, the Cash account will decrease.

Apply the rules of debits and credits: To increase the Land account, it must be debited. To decrease the Cash account, it must be credited.

Analyze the options provided: The correct effect of the transaction is 'Land is debited and Cash is credited,' as this reflects the increase in the Land account and the decrease in the Cash account.

Verify the logic: Ensure that the transaction aligns with the accounting equation (Assets = Liabilities + Equity). The exchange of one asset for another does not affect the overall balance of the equation.