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

How are revenues typically recorded in the journal using debits and credits?

Revenues are not recorded using debits or credits.

Revenues are recorded with a credit entry.

Revenues are recorded with a debit entry.

Revenues are recorded with both a debit and a credit entry to the same account.

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Verified step by step guidance

Understand the concept of revenues: Revenues represent the income earned by a business from its operations, such as sales of goods or services. In accounting, revenues increase the equity of the business.

Recall the rules of debits and credits: In double-entry accounting, credits increase revenue accounts, while debits decrease them. This is because revenue accounts are part of equity, and equity increases with credits.

Identify the journal entry for recording revenues: When a business earns revenue, it typically credits the revenue account to reflect the increase in income. Simultaneously, it debits another account, such as cash or accounts receivable, depending on how the revenue was earned (e.g., cash sales or credit sales).

Analyze the options provided: The correct answer is 'Revenues are recorded with a credit entry,' because revenues increase with credits. The other options are incorrect because they either contradict the rules of debits and credits or suggest an improper accounting treatment.

Apply this knowledge to journal entries: For example, if a company earns $1,000 in revenue from cash sales, the journal entry would be: Debit Cash $1,000 (to increase the asset account) and Credit Revenue $1,000 (to increase the revenue account). This ensures the accounting equation remains balanced.