Multiple Choice
Which of the following events would typically require a journal entry involving debits and credits in real-time financial reporting?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
On July 1st, a company receives an invoice for \$800 for office supplies purchased on account. Which of the following is the correct journal entry to record this transaction?
A
Debit Office Supplies \$800; Credit Cash \$800
B
Debit Office Supplies \$800; Credit Accounts Payable \$800
C
Debit Cash \$800; Credit Office Supplies \$800
D
Debit Accounts Payable \$800; Credit Office Supplies \$800
Verified step by step guidance1
Step 1: Understand the nature of the transaction. The company has received an invoice for office supplies purchased on account, meaning the supplies were acquired but payment has not yet been made. This creates a liability (Accounts Payable).
Step 2: Identify the accounts involved. The transaction affects the 'Office Supplies' account (an asset account) and 'Accounts Payable' account (a liability account).
Step 3: Determine the correct journal entry. Since office supplies are being acquired, the 'Office Supplies' account should be debited to increase its balance. The 'Accounts Payable' account should be credited to record the liability created by the unpaid invoice.
Step 4: Write the journal entry. The correct journal entry is: Debit Office Supplies \$800; Credit Accounts Payable \$800. This reflects the increase in assets (office supplies) and the increase in liabilities (accounts payable).
Step 5: Verify the entry. Ensure that the debit and credit amounts are equal (\$800), maintaining the accounting equation: Assets = Liabilities + Equity.
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