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

If a company purchases office supplies for $500 cash, how should the journal entry be recorded in terms of debits and credits?

Debit Accounts Payable $500; Credit Cash $500

Debit Office Supplies $500; Credit Cash $500

Debit Cash $500; Credit Office Supplies $500

Debit Office Supplies $500; Credit Accounts Payable $500

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Verified step by step guidance

Understand the nature of the transaction: The company is purchasing office supplies for $500 cash. This means the company is acquiring an asset (office supplies) and paying for it immediately using cash.

Recall the basic accounting principle: Every journal entry must have at least one debit and one credit, and the total debits must equal the total credits.

Identify the accounts involved: The accounts affected are 'Office Supplies' (an asset account) and 'Cash' (another asset account). Since office supplies are being acquired, this account will be debited. Since cash is being used to pay for the supplies, the cash account will be credited.

Determine the correct journal entry: Debit the 'Office Supplies' account for $500 to reflect the increase in assets. Credit the 'Cash' account for $500 to reflect the decrease in cash.

Write the journal entry: The journal entry will be formatted as follows: Debit Office Supplies $500; Credit Cash $500. This ensures the transaction is properly recorded in the company's books.