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

Dan purchased a new computer for $200 for his business. Which of the following is the correct journal entry to record this transaction?

Debit Expense $200; Credit Accounts Payable $200

Debit Accounts Payable $200; Credit Equipment $200

Debit Cash $200; Credit Equipment $200

Debit Equipment $200; Credit Cash $200

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Verified step by step guidance

Step 1: Understand the nature of the transaction. Dan purchased a computer for his business, which is considered an asset. Assets are recorded in the Equipment account, as the computer will provide future economic benefits to the business.

Step 2: Determine the accounts involved. The Equipment account will be debited because the business is acquiring an asset, and the Cash account will be credited because cash is being used to pay for the computer.

Step 3: Apply the double-entry accounting principle. Every transaction must have equal debits and credits. In this case, Debit Equipment $200 and Credit Cash $200 ensures the accounting equation remains balanced.

Step 4: Write the journal entry. The journal entry for this transaction is: Debit Equipment $200; Credit Cash $200. This reflects the increase in assets (Equipment) and the decrease in assets (Cash).

Step 5: Verify the journal entry. Ensure that the accounts affected align with the nature of the transaction and that the debit and credit amounts are equal, maintaining the integrity of the accounting equation.