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 correct regarding posting a transaction in the accounting system?

Credits are only used when recording expenses.

A transaction can be posted with only credits if it increases assets.

Each transaction must have at least one debit and one credit, and the total debits must equal the total credits.

Debits always increase all types of accounts.

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Verified step by step guidance

Step 1: Understand the concept of double-entry accounting. In this system, every transaction must have at least one debit and one credit, and the total debits must equal the total credits. This ensures the accounting equation (Assets = Liabilities + Equity) remains balanced.

Step 2: Clarify the role of debits and credits. Debits and credits are used to record changes in accounts. Debits increase asset and expense accounts, while they decrease liability, equity, and revenue accounts. Credits do the opposite: they decrease asset and expense accounts and increase liability, equity, and revenue accounts.

Step 3: Analyze the statement 'Credits are only used when recording expenses.' This is incorrect because credits are used for various purposes, such as increasing liabilities, equity, and revenue accounts, not just for recording expenses.

Step 4: Evaluate the statement 'A transaction can be posted with only credits if it increases assets.' This is incorrect because every transaction must have both a debit and a credit to maintain the balance in the accounting equation.

Step 5: Confirm the correct answer: 'Each transaction must have at least one debit and one credit, and the total debits must equal the total credits.' This aligns with the principles of double-entry accounting and ensures the financial records are accurate and balanced.