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

If a company purchases office supplies for $500 cash, which of the following journal entries correctly records the transaction?

Debit Accounts Payable $500; Credit Cash $500

Debit Office Supplies $500; Credit Cash $500

Debit Office Supplies $500; Credit Accounts Payable $500

Debit Cash $500; Credit Office Supplies $500

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Verified step by step guidance

Understand the nature of the transaction: The company is purchasing office supplies for $500 and paying 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 account changes: Since office supplies are being acquired, the 'Office Supplies' account will increase, which requires a debit entry. Since cash is being used to pay for the supplies, the 'Cash' account will decrease, which requires a credit entry.

Apply the double-entry accounting principle: For every transaction, debits must equal credits. In this case, debit 'Office Supplies' for $500 and credit 'Cash' for $500.

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