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

Mandy took out a $35 loan from the bank. Which of the following is the correct journal entry to record this transaction?

Debit Cash $35; Credit Notes Payable $35

Debit Cash $35; Credit Interest Expense $35

Debit Notes Payable $35; Credit Cash $35

Debit Bank Loan $35; Credit Cash $35

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Verified step by step guidance

Understand the nature of the transaction: Mandy is receiving cash from the bank as a loan. This means the company is increasing its cash balance and simultaneously creating a liability (Notes Payable) to repay the loan in the future.

Identify the accounts involved: The two accounts affected are 'Cash' (an asset account) and 'Notes Payable' (a liability account). Cash increases, and Notes Payable represents the obligation to repay the loan.

Determine the correct journal entry: In accounting, increases in assets are recorded as debits, and increases in liabilities are recorded as credits. Therefore, Cash will be debited, and Notes Payable will be credited.

Eliminate incorrect options: Review the provided options and eliminate those that do not align with the accounting principles. For example, 'Debit Notes Payable; Credit Cash' is incorrect because Notes Payable is a liability and should be credited, not debited.

Select the correct option: Based on the analysis, the correct journal entry is 'Debit Cash $35; Credit Notes Payable $35', as it properly reflects the increase in cash and the creation of a liability.