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 journal entries correctly records an owner's draw of $5,000 from the business?

Debit Owner's Draw $5,000; Credit Cash $5,000

Debit Owner's Equity $5,000; Credit Cash $5,000

Debit Expenses $5,000; Credit Owner's Draw $5,000

Debit Cash $5,000; Credit Owner's Draw $5,000

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Verified step by step guidance

Understand the concept of an owner's draw: An owner's draw represents the withdrawal of funds by the owner from the business for personal use. It reduces the owner's equity in the business but is not considered an expense.

Identify the accounts involved: The two accounts affected by an owner's draw are 'Owner's Draw' and 'Cash.' The 'Owner's Draw' account is debited to reflect the reduction in equity, and the 'Cash' account is credited to show the decrease in the business's cash balance.

Determine the correct journal entry format: A journal entry must follow the format of debiting one account and crediting another. For an owner's draw, the entry would be: Debit Owner's Draw and Credit Cash.

Analyze the options provided: Review each option to see which one matches the correct journal entry format for an owner's draw. The correct entry should debit 'Owner's Draw' and credit 'Cash' for $5,000.

Verify the reasoning: Ensure that the chosen journal entry aligns with accounting principles. The owner's draw reduces equity (debit) and decreases cash (credit), which is consistent with the transaction's nature.