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 best represents the journal entry to record the purchase of materials on credit for factory use?

Debit Raw Materials Inventory; Credit Accounts Payable

Debit Work in Process Inventory; Credit Cash

Debit Accounts Payable; Credit Raw Materials Inventory

Debit Factory Overhead; Credit Accounts Receivable

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Verified step by step guidance

Understand the context: The problem involves recording a journal entry for the purchase of materials on credit for factory use. This is a transaction that impacts inventory and accounts payable, as the materials are purchased on credit.

Identify the correct accounts: When materials are purchased for factory use, they are typically classified as 'Raw Materials Inventory' because they will be used in production. Since the purchase is on credit, the liability is recorded in 'Accounts Payable.'

Determine the type of entry: A journal entry requires a debit to the account that increases (in this case, 'Raw Materials Inventory') and a credit to the account that represents the liability (in this case, 'Accounts Payable').

Apply the accounting equation: The accounting equation (Assets = Liabilities + Equity) ensures that the transaction is balanced. Debiting 'Raw Materials Inventory' increases assets, while crediting 'Accounts Payable' increases liabilities, maintaining the balance.

Construct the journal entry: The journal entry would be formatted as follows: Debit 'Raw Materials Inventory' for the cost of the materials and Credit 'Accounts Payable' for the same amount, reflecting the purchase on credit.