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 items are credited to the seller and debited to the buyer in a typical sales transaction?

Inventory

Accounts Receivable

Sales Revenue

Cash Discounts

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Verified step by step guidance

Understand the nature of a typical sales transaction: In a sales transaction, the seller provides goods or services to the buyer, and the buyer compensates the seller either immediately (cash) or through credit terms (accounts receivable). The accounting entries reflect these exchanges.

Identify the accounts involved for the seller: The seller typically credits 'Sales Revenue' to recognize the income earned from the sale. If the buyer pays immediately, 'Cash' is debited. If the buyer purchases on credit, 'Accounts Receivable' is debited.

Identify the accounts involved for the buyer: The buyer debits 'Inventory' to recognize the goods received and credits 'Accounts Payable' if the purchase is made on credit. If the buyer pays immediately, 'Cash' is credited.

Understand the role of cash discounts: Cash discounts are incentives offered by the seller to encourage early payment. If the buyer takes advantage of the discount, the seller debits 'Sales Discounts' (a contra-revenue account), and the buyer reduces the amount credited to 'Accounts Payable' or 'Cash'.

Summarize the transaction flow: In a typical sales transaction, 'Sales Revenue' is credited by the seller to record income, and 'Inventory' is debited by the buyer to record the goods received. Cash discounts, if applicable, adjust the payment terms and are reflected in the respective accounts.