Multiple Choice
If you want to calculate the total debits recorded in cells A51 through A55 in an Excel spreadsheet, which of the following formulas can you copy and paste to get the correct sum?
116
views
2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following is the correct journal entry to record the purchase of \$1,000 of supplies on credit on December 31?
A
Debit Cash \$1,000; Credit Supplies \$1,000
B
Debit Accounts Payable \$1,000; Credit Supplies \$1,000
C
Debit Supplies \$1,000; Credit Accounts Payable \$1,000
D
Debit Supplies Expense \$1,000; Credit Cash \$1,000
Verified step by step guidance1
Step 1: Understand the nature of the transaction. The purchase of supplies on credit means the company is acquiring supplies but has not yet paid for them. This creates a liability (Accounts Payable) and increases the asset (Supplies).
Step 2: Recall the rules of debits and credits. Assets increase with debits and liabilities increase with credits. Since Supplies is an asset account, it will be debited, and Accounts Payable, a liability account, will be credited.
Step 3: Analyze the incorrect options provided. For example, 'Debit Cash \$1,000; Credit Supplies \$1,000' is incorrect because cash is not involved in this transaction. Similarly, 'Debit Accounts Payable \$1,000; Credit Supplies \$1,000' reverses the correct accounts, and 'Debit Supplies Expense \$1,000; Credit Cash \$1,000' incorrectly treats the purchase as an expense and involves cash.
Step 4: Write the correct journal entry. The correct entry is: Debit Supplies \$1,000; Credit Accounts Payable \$1,000. This reflects the increase in supplies and the liability created by purchasing on credit.
Step 5: Confirm the date of the transaction. Since the purchase occurred on December 31, ensure the journal entry is recorded with this date to accurately reflect the timing of the transaction in the accounting records.
Related Videos
Related Practice
