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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

When a store purchases a jacket for $20.00 cash for inventory, which of the following is the correct journal entry?

Debit Expense $20.00; Credit Inventory $20.00

Debit Inventory $20.00; Credit Cash $20.00

Debit Inventory $20.00; Credit Sales Revenue $20.00

Debit Cash $20.00; Credit Inventory $20.00

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Verified step by step guidance

Step 1: Understand the transaction. The store is purchasing a jacket for $20.00 cash to add to its inventory. This is an asset purchase, not an expense or revenue transaction.

Step 2: Identify the accounts involved. The two accounts affected are 'Inventory' (an asset account) and 'Cash' (another asset account). Inventory increases, and Cash decreases.

Step 3: Determine the type of entry for each account. Since Inventory is increasing, it will be debited. Since Cash is decreasing, it will be credited.

Step 4: Write the journal entry. The journal entry will be: Debit Inventory $20.00; Credit Cash $20.00. This reflects the increase in inventory and the decrease in cash.

Step 5: Verify the entry. Ensure that the debit and credit amounts are equal ($20.00 each) and that the accounts used correctly reflect the nature of the transaction (asset purchase).