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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

When an individual deposits a check at the local bank, how should the bank record this transaction in its accounting records?

Debit Revenue; Credit Cash

Debit Cash; Credit Customer Deposits (Liability)

Debit Cash; Credit Revenue

Debit Customer Deposits (Liability); Credit Cash

Previous problemNext problem

Verified step by step guidance

Understand the nature of the transaction: When an individual deposits a check at the bank, the bank receives cash (or its equivalent) and incurs a liability to the customer, as the deposited funds are owed to the customer until withdrawn or used.

Identify the accounts involved: The two accounts affected are 'Cash' (an asset account) and 'Customer Deposits' (a liability account).

Determine the impact on the accounts: The bank's cash balance increases, so 'Cash' is debited. Simultaneously, the bank's liability to the customer increases, so 'Customer Deposits' is credited.

Apply the double-entry accounting principle: For every transaction, there must be at least one debit and one credit of equal amounts. In this case, debit 'Cash' and credit 'Customer Deposits' for the same amount.

Record the journal entry: The journal entry for this transaction would be: Debit 'Cash' (asset) and Credit 'Customer Deposits' (liability). This reflects the increase in the bank's cash and its obligation to the customer.