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

On July 1, a company receives an invoice for $800 for office supplies purchased on account. Which of the following is the correct journal entry to record this transaction?

Debit Office Supplies $800; Credit Accounts Payable $800

Debit Accounts Payable $800; Credit Office Supplies $800

Debit Cash $800; Credit Office Supplies $800

Debit Office Supplies $800; Credit Cash $800

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Verified step by step guidance

Step 1: Understand the nature of the transaction. The company has received an invoice for office supplies purchased on account, meaning the supplies were acquired but payment has not yet been made. This indicates a liability (Accounts Payable) is created.

Step 2: Identify the accounts involved. The transaction affects the 'Office Supplies' account (an asset account) and the 'Accounts Payable' account (a liability account). Since office supplies are being acquired, the 'Office Supplies' account will be debited to increase its balance.

Step 3: Determine the impact on 'Accounts Payable'. Since the company owes money for the supplies, the 'Accounts Payable' account will be credited to reflect the increase in liability.

Step 4: Write the journal entry. The journal entry will be: Debit 'Office Supplies' for $800 to increase the asset account, and Credit 'Accounts Payable' for $800 to increase the liability account.

Step 5: Verify the journal entry. Ensure that the debit and credit amounts are equal ($800), maintaining the accounting equation: Assets = Liabilities + Equity.