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 journal entries records the amount in the wrong column (debit instead of credit, or vice versa)?

Crediting Accounts Payable when paying off a supplier

Crediting Capital when the owner invests cash

Debiting Cash for a sale of inventory

Debiting Revenue when earning service income

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Verified step by step guidance

Step 1: Understand the basic rules of journal entries. In double-entry accounting, every transaction involves at least one debit and one credit. Debits and credits must always balance, and they are recorded in specific accounts based on the nature of the transaction.

Step 2: Analyze the first option: 'Crediting Accounts Payable when paying off a supplier.' When paying off a supplier, the Accounts Payable account is reduced (debited), and Cash is credited to reflect the payment. Crediting Accounts Payable in this case would be incorrect.

Step 3: Analyze the second option: 'Crediting Capital when the owner invests cash.' When the owner invests cash, the Capital account is credited to reflect the increase in equity, and Cash is debited to show the inflow of funds. This entry is correct.

Step 4: Analyze the third option: 'Debiting Cash for a sale of inventory.' When inventory is sold, Cash is debited to reflect the inflow of money, and Revenue is credited to record the income earned. This entry is correct.

Step 5: Analyze the fourth option: 'Debiting Revenue when earning service income.' Revenue is always credited when income is earned, as it increases equity. Debiting Revenue would be incorrect because it would reduce equity instead of increasing it. This is the wrong entry.