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 statements about a journal in accounting is correct?

A journal only records transactions that affect cash accounts.

Journal entries do not require equal debits and credits.

A journal is used to prepare the balance sheet directly.

A journal is a chronological record of all business transactions before they are posted to ledger accounts.

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Verified step by step guidance

Understand the purpose of a journal in accounting: A journal is a chronological record of all business transactions. It serves as the first step in the accounting process before transactions are posted to ledger accounts.

Clarify the misconception about cash accounts: A journal does not only record transactions affecting cash accounts. It records all types of transactions, including those involving assets, liabilities, equity, revenue, and expenses.

Explain the principle of double-entry accounting: Journal entries require equal debits and credits to maintain the accounting equation (Assets = Liabilities + Equity). This ensures the financial records are balanced.

Discuss the relationship between the journal and the balance sheet: A journal is not used to prepare the balance sheet directly. Instead, transactions are posted from the journal to ledger accounts, and the ledger is used to prepare financial statements, including the balance sheet.

Conclude with the correct statement: The correct answer is that a journal is a chronological record of all business transactions before they are posted to ledger accounts. This highlights the journal's role in the accounting cycle.