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 the purchase of office supplies for $500 cash by Sustain Company?

Debit Accounts Payable $500; Credit Cash $500

Debit Office Supplies $500; Credit Cash $500

Debit Cash $500; Credit Office Supplies $500

Debit Office Supplies $500; Credit Accounts Payable $500

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Verified step by step guidance

Understand the nature of the transaction: The company is purchasing office supplies for $500 in cash. This means the company is acquiring an asset (office supplies) and reducing another asset (cash).

Identify the accounts involved: The accounts affected are 'Office Supplies' (an asset account) and 'Cash' (another asset account).

Determine the type of entry for each account: Since office supplies are being acquired, the 'Office Supplies' account will be debited to increase its balance. Since cash is being used to pay for the supplies, the 'Cash' account will be credited to decrease its balance.

Write the journal entry: The correct journal entry will be 'Debit Office Supplies $500; Credit Cash $500'. This reflects the increase in office supplies and the decrease in cash.

Review the other options provided: The other options incorrectly record the transaction by either using the wrong accounts (e.g., Accounts Payable) or reversing the debit and credit entries. Ensure you understand why these are incorrect to avoid confusion in similar problems.