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

When a business purchases supplies on account, which two accounts are affected in the journal entry?

Accounts Receivable (Debit) and Supplies (Credit)

Cash (Debit) and Supplies (Credit)

Supplies (Debit) and Accounts Payable (Credit)

Supplies Expense (Debit) and Cash (Credit)

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Verified step by step guidance

Step 1: Understand the transaction type. The business is purchasing supplies on account, meaning it is acquiring supplies but has not yet paid for them. This creates a liability to pay in the future.

Step 2: Identify the accounts involved. Supplies are an asset account because they represent resources owned by the business. Accounts Payable is a liability account because it represents the obligation to pay for the supplies in the future.

Step 3: Determine the impact on each account. Since supplies are being acquired, the Supplies account will increase, which is recorded as a debit. Accounts Payable will also increase because the business owes money, which is recorded as a credit.

Step 4: Write the journal entry. The journal entry will include a debit to Supplies and a credit to Accounts Payable. This reflects the increase in assets and liabilities due to the transaction.

Step 5: Verify the accounting equation. Ensure that the transaction maintains the balance of the accounting equation: Assets = Liabilities + Equity. The increase in Supplies (asset) is balanced by the increase in Accounts Payable (liability).