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 should an annual business license fee be recorded in a journal entry?

Debit Accounts Payable; Credit License Expense

Debit Cash; Credit License Expense

Debit License Expense; Credit Cash

Debit License Expense; Credit Revenue

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Verified step by step guidance

Understand the nature of the transaction: An annual business license fee is an expense incurred by the business, typically paid in cash. This means it should be recorded as an expense and a reduction in cash.

Identify the accounts involved: The two accounts affected are 'License Expense' (an expense account) and 'Cash' (an asset account).

Determine the correct journal entry: Expenses are recorded as debits because they decrease equity, and cash payments are recorded as credits because they reduce the asset account.

Write the journal entry: Debit 'License Expense' to recognize the cost incurred, and Credit 'Cash' to reflect the payment made.

Review the entry for accuracy: Ensure the debit and credit amounts are equal and correctly reflect the transaction.