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

2. When recording the opening balance of John Jones's account on the first day of the statement period, which journal entry is correct if his account had a balance of $5,000?

Debit Owner's Capital $5,000; Credit Cash $5,000

Debit Cash $2,500; Credit Owner's Capital $2,500

Debit Cash $5,000; Credit Owner's Capital $5,000

Debit Revenue $5,000; Credit Cash $5,000

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Verified step by step guidance

Step 1: Understand the context of the problem. The opening balance refers to the amount of money in John Jones's account at the beginning of the statement period. This balance needs to be recorded in the accounting system using a journal entry.

Step 2: Recall the basic accounting principle of double-entry bookkeeping. Every transaction must have a debit and a credit entry, and the total debits must equal the total credits.

Step 3: Analyze the account types involved. 'Cash' is an asset account, and 'Owner's Capital' is an equity account. An increase in assets is recorded as a debit, while an increase in equity is recorded as a credit.

Step 4: Determine the correct journal entry based on the given balance of $5,000. Since the account had a balance of $5,000, the journal entry should reflect an increase in the Cash account (debit) and an increase in the Owner's Capital account (credit).

Step 5: Write the journal entry: Debit Cash $5,000; Credit Owner's Capital $5,000. This entry correctly reflects the increase in assets and equity due to the opening balance.