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 is included in the journal entry necessary to record the sale of goods on account?

Debit Inventory and credit Sales Revenue

Debit Cash and credit Inventory

Debit Sales Revenue and credit Accounts Receivable

Debit Accounts Receivable and credit Sales Revenue

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Verified step by step guidance

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.