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

Ming Chen started a business and, during June, invested $10,000 cash into the company. Which of the following is the correct journal entry to record this transaction?

Debit Cash $10,000; Credit Owner's Capital $10,000

Debit Cash $10,000; Credit Revenue $10,000

Debit Owner's Capital $10,000; Credit Cash $10,000

Debit Revenue $10,000; Credit Cash $10,000

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Verified step by step guidance

Step 1: Understand the nature of the transaction. Ming Chen invested $10,000 cash into the business, which means the business received cash (an asset) and the owner's equity increased due to the investment.

Step 2: Recall the accounting equation: Assets = Liabilities + Owner's Equity. Since cash is an asset and the investment increases Owner's Equity, this transaction affects both sides of the equation.

Step 3: Determine the accounts involved. The accounts affected are 'Cash' (an asset account) and 'Owner's Capital' (an equity account). Cash increases, so it will be debited, and Owner's Capital increases, so it will be credited.

Step 4: Apply the rules of debits and credits. Assets increase with a debit, and equity increases with a credit. Therefore, the journal entry will be: Debit Cash $10,000; Credit Owner's Capital $10,000.

Step 5: Eliminate incorrect options. 'Debit Cash $10,000; Credit Revenue $10,000' is incorrect because revenue is not involved in this transaction. 'Debit Owner's Capital $10,000; Credit Cash $10,000' is incorrect because it reverses the correct entry. 'Debit Revenue $10,000; Credit Cash $10,000' is incorrect because revenue is unrelated to the owner's investment.