Multiple Choice
For each of the following accounts, indicate the effect of a debit and a credit. Which of the following correctly describes the effect of a debit and a credit on an asset account?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
When materials are used in production, which accounts are affected by the journal entry?
A
Debit Work in Process Inventory; Credit Raw Materials Inventory
B
Debit Manufacturing Overhead; Credit Work in Process Inventory
C
Debit Finished Goods Inventory; Credit Raw Materials Inventory
D
Debit Raw Materials Inventory; Credit Work in Process Inventory
Verified step by step guidance1
Understand the context: The question is about the journal entry when materials are used in production. This involves tracking the movement of inventory accounts in a manufacturing setting.
Identify the accounts involved: When materials are used in production, the Raw Materials Inventory account decreases (credit), and the Work in Process Inventory account increases (debit). This reflects the transfer of raw materials into production.
Clarify the journal entry: The correct journal entry would be 'Debit Work in Process Inventory' to show the increase in production materials and 'Credit Raw Materials Inventory' to show the decrease in raw materials.
Eliminate incorrect options: Review the other options provided and ensure they do not match the correct accounting treatment. For example, 'Debit Manufacturing Overhead; Credit Work in Process Inventory' is incorrect because manufacturing overhead is not directly affected by raw materials usage.
Confirm the correct answer: Based on the analysis, the correct journal entry is 'Debit Work in Process Inventory; Credit Raw Materials Inventory,' as this accurately reflects the movement of materials into production.
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