Multiple Choice
Which of the following forms can be used to record a payment made at the time of purchase by check?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Under which of the following circumstances would Cash be credited and Equipment be debited in a journal entry?
A
When cash is received from a customer for services rendered.
B
When equipment is sold for cash.
C
When equipment is purchased by paying cash.
D
When equipment is donated to the company.
Verified step by step guidance1
Understand the basic accounting principle: In a journal entry, debits and credits must balance, and they represent changes in accounts. Debits typically increase asset accounts, while credits decrease them.
Analyze the transaction: The problem states that equipment is purchased by paying cash. This means the company is acquiring an asset (equipment) and reducing another asset (cash).
Determine the accounts involved: The two accounts affected are 'Equipment' (an asset account) and 'Cash' (another asset account).
Apply the journal entry rules: Since equipment is being acquired, it is debited to increase its balance. Cash is being paid, so it is credited to decrease its balance.
Write the journal entry: Debit the 'Equipment' account and credit the 'Cash' account to reflect the purchase transaction.
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