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 journal entries correctly records Aracel Engineering's purchase of office supplies on account in June for $1,200?

Debit Office Supplies $1,200; Credit Accounts Payable $1,200

Debit Cash $1,200; Credit Office Supplies $1,200

Debit Accounts Payable $1,200; Credit Office Supplies $1,200

Debit Office Supplies $1,200; Credit Cash $1,200

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Verified step by step guidance

Step 1: Understand the transaction. Aracel Engineering is purchasing office supplies on account, meaning they are not paying cash immediately but instead creating a liability (Accounts Payable). This transaction involves two accounts: Office Supplies (an asset account) and Accounts Payable (a liability account).

Step 2: Determine the impact on the accounts. The purchase of office supplies increases the Office Supplies account, which is debited to reflect the increase in assets. Since the purchase is on account, Accounts Payable increases, which is credited to reflect the increase in liabilities.

Step 3: Recall the accounting equation: Assets = Liabilities + Equity. This transaction affects both assets (Office Supplies) and liabilities (Accounts Payable), keeping the equation balanced.

Step 4: Write the journal entry. The correct journal entry is: Debit Office Supplies $1,200 (to increase the asset account) and Credit Accounts Payable $1,200 (to increase the liability account).

Step 5: Eliminate incorrect options. The other options involve incorrect accounts or payment methods (e.g., using Cash instead of Accounts Payable), which do not align with the transaction described. Focus on the correct accounts and their respective debit/credit rules.