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

With double-entry accounting, each transaction requires:

an equal number of entries in revenue and expense accounts

only a single entry, either a debit or a credit

entries only to asset accounts

at least one debit and one credit entry of equal amounts

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Verified step by step guidance

Understand the concept of double-entry accounting: Double-entry accounting is a system where every financial transaction affects at least two accounts, ensuring the accounting equation (Assets = Liabilities + Equity) remains balanced.

Recognize the rule of debits and credits: In double-entry accounting, every transaction must have at least one debit and one credit entry, and the total debits must equal the total credits.

Analyze the options provided: The first option suggests equal entries in revenue and expense accounts, which is incorrect because transactions can involve other types of accounts (e.g., assets, liabilities). The second option suggests only a single entry, which contradicts the double-entry principle. The third option limits entries to asset accounts, which is also incorrect as transactions can involve liabilities, equity, revenue, or expenses.

Identify the correct principle: The correct answer is that each transaction requires at least one debit and one credit entry of equal amounts, as this ensures the accounting equation remains balanced.

Apply this understanding to real-world scenarios: For example, if a company purchases equipment for cash, the Equipment account (an asset) is debited, and the Cash account (another asset) is credited for the same amount, maintaining the balance.