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 Shariz receives a vendor invoice for goods purchased on credit, which journal entry should be recorded?

Debit Cash; Credit Accounts Payable

Debit Accounts Receivable; Credit Inventory

Debit Inventory; Credit Accounts Payable

Debit Accounts Payable; Credit Inventory

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Verified step by step guidance

Understand the nature of the transaction: Shariz has received a vendor invoice for goods purchased on credit. This means Shariz has acquired inventory but has not yet paid for it, creating a liability (Accounts Payable).

Identify the accounts involved: The transaction affects the Inventory account (an asset account) and the Accounts Payable account (a liability account).

Determine the impact on each account: Since inventory is being acquired, the Inventory account should be increased (debited). Since the purchase is on credit, the Accounts Payable account should also be increased (credited).

Apply the double-entry accounting principle: For every debit, there must be an equal credit. In this case, Debit Inventory and Credit Accounts Payable to reflect the increase in assets and liabilities respectively.

Record the journal entry: The journal entry would be formatted as follows: Debit Inventory (to increase assets) and Credit Accounts Payable (to increase liabilities). This ensures the accounting equation remains balanced.