Multiple Choice
When a company records the following journal entry:\[\begin{align*}\text{Equipment} & \quad \$5,000 \\ \quad \text{Cash} & \quad \$5,000 \end{align*}\]What effects does this journal entry have on the accounts?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following is included in the journal entry necessary to record the sale of goods on account?
A
Debit Inventory and credit Sales Revenue
B
Debit Cash and credit Inventory
C
Debit Sales Revenue and credit Accounts Receivable
D
Debit Accounts Receivable and credit Sales Revenue
Verified step by step guidance1
Understand the context: The problem involves recording the sale of goods on account, which means the customer has purchased goods but has not paid cash immediately. Instead, the amount is recorded as Accounts Receivable.
Identify the accounts involved: When goods are sold on account, the seller recognizes revenue (Sales Revenue) and records the amount owed by the customer as an asset (Accounts Receivable).
Determine the journal entry structure: In a journal entry, debits and credits must balance. For this transaction, Accounts Receivable is debited because it increases the asset account, and Sales Revenue is credited because it increases the revenue account.
Apply the accounting equation: The accounting equation (Assets = Liabilities + Equity) ensures that the increase in Accounts Receivable (an asset) corresponds to an increase in Sales Revenue, which contributes to equity.
Write the journal entry: The journal entry to record the sale of goods on account is: Debit Accounts Receivable and Credit Sales Revenue. This reflects the increase in assets and revenue appropriately.
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