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 Chinwe owes $2,000 to a supplier and pays off the debt in cash, which of the following journal entries correctly records the transaction?

Debit Accounts Receivable $2,000; Credit Cash $2,000

Debit Supplies $2,000; Credit Cash $2,000

Debit Cash $2,000; Credit Accounts Payable $2,000

Debit Accounts Payable $2,000; Credit Cash $2,000

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Verified step by step guidance

Understand the nature of the transaction: Chinwe is paying off a debt owed to a supplier. This means the liability (Accounts Payable) will decrease, and cash will be used to settle the debt.

Recall the accounting principle of double-entry bookkeeping: Every transaction affects at least two accounts, and the total debits must equal the total credits.

Identify the accounts involved: The liability account 'Accounts Payable' will be debited to reduce the amount owed, and the asset account 'Cash' will be credited to reflect the payment made.

Determine the journal entry: Debit 'Accounts Payable' for $2,000 to decrease the liability, and Credit 'Cash' for $2,000 to show the reduction in cash.

Verify the logic: Ensure the journal entry reflects the transaction accurately. Debiting 'Accounts Payable' reduces the liability, and crediting 'Cash' decreases the asset, which aligns with the payment of the debt.