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

Given the following data for Hermann Corporation:- Purchased equipment for $10,000 cash.Which of the following is the correct journal entry to record this transaction?

Debit Cash $10,000; Credit Equipment $10,000

Debit Equipment $10,000; Credit Cash $10,000

Debit Equipment $10,000; Credit Accounts Payable $10,000

Debit Accounts Payable $10,000; Credit Equipment $10,000

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Verified step by step guidance

Step 1: Understand the nature of the transaction. Hermann Corporation purchased equipment for $10,000 cash. This means the company acquired an asset (equipment) and paid for it using cash, which is another asset.

Step 2: Recall the accounting principle of double-entry bookkeeping. Every transaction affects at least two accounts, and the total debits must equal the total credits.

Step 3: Identify the accounts involved. In this case, the accounts are 'Equipment' (an asset account) and 'Cash' (another asset account). Since equipment is being acquired, it will be debited, and since cash is being used to pay for it, cash will be credited.

Step 4: Determine the correct journal entry. The debit entry increases the Equipment account by $10,000, reflecting the acquisition of the asset. The credit entry decreases the Cash account by $10,000, reflecting the payment made.

Step 5: Write the journal entry. The correct journal entry is: Debit Equipment $10,000; Credit Cash $10,000. This reflects the increase in equipment and the decrease in cash due to the purchase.