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

When materials are purchased on credit for later use in production, which account is debited in the journal entry?

Work in Process Inventory

Accounts Payable

Raw Materials Inventory

Cost of Goods Sold

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Verified step by step guidance

Understand the nature of the transaction: When materials are purchased on credit, it means the company is acquiring raw materials for production but has not yet paid for them. This transaction involves two accounts: Raw Materials Inventory and Accounts Payable.

Identify the account to be debited: In accounting, a debit entry increases asset accounts. Since the company is acquiring raw materials, the Raw Materials Inventory account (an asset account) will be debited to reflect the increase in inventory.

Identify the account to be credited: A credit entry increases liability accounts. Since the purchase is made on credit, the Accounts Payable account (a liability account) will be credited to reflect the obligation to pay the supplier in the future.

Write the journal entry: The journal entry for this transaction will be: Debit Raw Materials Inventory and Credit Accounts Payable. This ensures the accounting equation remains balanced.

Understand why other accounts are not involved: Work in Process Inventory is used when materials are actively being used in production, and Cost of Goods Sold is used when goods are sold. Neither applies to the initial purchase of raw materials, which is why Raw Materials Inventory is the correct account to debit.