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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is the correct journal entry when a coin collector buys a set of coins for \$500 in cash?

Debit Cash \$500; Credit Inventory (Coins) \$500

Debit Accounts Payable \$500; Credit Cash \$500

Debit Expense \$500; Credit Revenue \$500

Debit Inventory (Coins) \$500; Credit Cash \$500

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the transaction. The coin collector is purchasing a set of coins for $500 in cash. This means the collector is acquiring inventory (coins) and paying for it immediately using cash.

Step 2: Identify the accounts involved. The two accounts affected are 'Inventory (Coins)' and 'Cash'. Inventory is an asset account, and Cash is also an asset account.

Step 3: Determine the impact on each account. Since the collector is acquiring inventory, the 'Inventory (Coins)' account will increase, which requires a debit entry. On the other hand, cash is being used to pay for the purchase, so the 'Cash' account will decrease, which requires a credit entry.

Step 4: Apply the double-entry accounting principle. For every transaction, debits must equal credits. In this case, debit 'Inventory (Coins)' for $500 and credit 'Cash' for $500.

Step 5: Write the journal entry. The correct journal entry is: Debit Inventory (Coins) $500; Credit Cash $500. This reflects the increase in inventory and the decrease in cash due to the purchase.