Bookkeeping Journal Flashcards

A company purchases $3,000 of inventory on account. Which journal entry is correct?

Answer: Debit Inventory $3,000; Credit Accounts Payable $3,000

Purchasing inventory on account increases the asset Inventory (debit) and creates a liability Accounts Payable (credit).

What is the purpose of a compound journal entry?

Answer: To record a transaction involving more than two accounts

A compound journal entry records a single transaction that affects more than two accounts while keeping debits equal to credits.

Which journal would be used to record the return of merchandise previously purchased on credit?

Answer: Purchases Returns and Allowances Journal

Purchases returns and allowances have their own special journal to track reductions in amounts owed to suppliers.

When a business pays its utility bill with a check, which journal records this transaction?

Answer: Cash Disbursements Journal

The cash disbursements journal records all outgoing cash payments, including checks written for expenses.

A journal entry shows a debit to Salaries Expense and a credit to Salaries Payable. What does this represent?

Answer: Accrued salaries earned but not yet paid

Debiting Salaries Expense and crediting Salaries Payable records wages earned by employees that have not yet been paid in cash.

In the general journal, what information is recorded in the 'Description' or 'Narration' column?

Answer: A brief explanation of the transaction

The narration provides a brief explanation of the transaction to give context and aid future reference or auditing.

Which entry records the owner withdrawing cash from the business for personal use?

Answer: Debit Owner's Drawings; Credit Cash

Withdrawals reduce owner's equity through the Drawings account (debit) and reduce the Cash asset (credit).