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 sets of steps would best help track accounts payable at a business?

Record all cash receipts by debiting Accounts Receivable and crediting Sales Revenue; monitor the Sales Revenue account.

Record purchases on credit by debiting Accounts Payable and crediting Cash; reconcile the Cash account monthly.

Record purchases on credit by debiting Inventory (or relevant expense) and crediting Accounts Payable; regularly review the Accounts Payable ledger.

Record payments to suppliers by debiting Sales Revenue and crediting Accounts Payable; review the Sales Revenue ledger.

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Verified step by step guidance

Understand the concept of Accounts Payable: Accounts Payable represents the amount a business owes to suppliers for goods or services purchased on credit. It is a liability account that needs to be tracked accurately.

Identify the correct accounting entry for purchases on credit: When a business purchases inventory or incurs an expense on credit, the appropriate journal entry is to debit the Inventory account (or relevant expense account) and credit the Accounts Payable account. This reflects the increase in liabilities and the acquisition of assets or expenses.

Regularly review the Accounts Payable ledger: To ensure accuracy and avoid errors, the Accounts Payable ledger should be reviewed periodically. This helps track outstanding balances owed to suppliers and ensures timely payments.

Understand the importance of reconciling payments: When payments are made to suppliers, the journal entry should debit the Accounts Payable account (reducing the liability) and credit the Cash account (reducing the asset). This ensures that the payment is properly recorded and reconciled.

Avoid incorrect entries: For example, debiting Sales Revenue or Accounts Receivable when tracking Accounts Payable is incorrect because these accounts are unrelated to liabilities owed to suppliers. Focus on the correct accounts (Inventory, Accounts Payable, Cash) for accurate tracking.