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 is the correct journal entry to record the purchase of equipment for cash?

Debit Cash; Credit Equipment

Debit Equipment; Credit Cash

Debit Accounts Payable; Credit Equipment

Debit Equipment; Credit Accounts Payable

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Verified step by step guidance

Understand the nature of the transaction: The purchase of equipment for cash means the company is acquiring a tangible asset (equipment) and paying for it immediately using cash.

Recall the accounting principle of double-entry bookkeeping: Every transaction affects at least two accounts, and the total debits must equal the total credits.

Identify the accounts involved: Equipment is an asset account, and Cash is also an asset account. When equipment is purchased, the Equipment account increases (debit), and the Cash account decreases (credit).

Determine the correct journal entry: To record the purchase of equipment for cash, you would debit the Equipment account to reflect the increase in assets and credit the Cash account to reflect the decrease in cash.

Review the options provided: The correct journal entry is 'Debit Equipment; Credit Cash,' as it aligns with the double-entry bookkeeping principle and the nature of the transaction.