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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is the correct effect on accounts when a company purchases equipment for cash?

Debit Cash, Credit Equipment

Debit Equipment, Credit Cash

Debit Accounts Payable, Credit Equipment

Debit Equipment, Credit Accounts Payable

Previous problemNext problem

Verified step by step guidance

Understand the nature of the transaction: When a company purchases equipment for cash, it is acquiring a tangible asset (equipment) and reducing another asset (cash). This transaction does not involve liabilities such as accounts payable.

Recall the accounting equation: Assets = Liabilities + Equity. In this case, the purchase affects only the asset side of the equation, increasing equipment and decreasing cash.

Apply the rules of debits and credits: Debits increase asset accounts, while credits decrease asset accounts. Since equipment is being acquired, it is debited, and since cash is being used, it is credited.

Analyze the options provided: The correct journal entry should reflect a debit to Equipment (increase in asset) and a credit to Cash (decrease in asset). The other options either incorrectly involve accounts payable or reverse the debit and credit entries.

Conclude the correct effect: The correct journal entry for purchasing equipment for cash is 'Debit Equipment, Credit Cash,' as this properly reflects the increase in equipment and decrease in cash.