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

The purchase of raw materials on account in a process costing system is recorded with a:

Debit to Work in Process Inventory and credit to Cash

Debit to Accounts Payable and credit to Raw Materials Inventory

Debit to Raw Materials Inventory and credit to Accounts Payable

Debit to Manufacturing Overhead and credit to Raw Materials Inventory

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Verified step by step guidance

Understand the context: In a process costing system, the purchase of raw materials on account refers to acquiring materials needed for production, where payment is deferred and recorded as a liability (Accounts Payable).

Identify the correct accounts: When raw materials are purchased, they are recorded as an asset (Raw Materials Inventory) because they will be used in production. The liability (Accounts Payable) is credited to reflect the obligation to pay for these materials later.

Apply the accounting principle: The double-entry accounting system requires that every transaction affects at least two accounts. In this case, the debit increases the Raw Materials Inventory account, and the credit increases the Accounts Payable account.

Write the journal entry: The journal entry for this transaction would be: Debit Raw Materials Inventory (to increase the asset) and Credit Accounts Payable (to increase the liability).

Review the options provided: Compare the options given in the problem and confirm that the correct answer aligns with the journal entry described above: Debit to Raw Materials Inventory and Credit to Accounts Payable.