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

When a company purchases office supplies for cash, which account should be debited?

Service Revenue

Accounts Payable

Cash

Office Supplies

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Verified step by step guidance

Understand the nature of the transaction: The company is purchasing office supplies, which are considered an asset, and paying for them in cash. This means one asset account (Office Supplies) increases, while another asset account (Cash) decreases.

Recall the basic accounting principle: In double-entry accounting, every transaction affects at least two accounts. One account is debited, and the other is credited.

Determine which account is debited: When an asset increases, it is debited. Since the company is acquiring office supplies, the Office Supplies account should be debited.

Determine which account is credited: When an asset decreases, it is credited. Since the company is paying cash, the Cash account should be credited.

Apply the journal entry format: The journal entry for this transaction would be: Debit Office Supplies and Credit Cash. This ensures the accounting equation (Assets = Liabilities + Equity) remains balanced.