Multiple Choice
In the context of recording journal entries, which of the following statements correctly describes the effect of a debit entry?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
When a business purchases supplies on account, which two accounts are affected in the journal entry?
A
Accounts Receivable (Debit) and Supplies (Credit)
B
Cash (Debit) and Supplies (Credit)
C
Supplies (Debit) and Accounts Payable (Credit)
D
Supplies Expense (Debit) and Cash (Credit)
Verified step by step guidance1
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).
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