Journalizing and Posting Transactions Flashcards

When a business purchases supplies on account, which journal entry is correct?

Answer: Debit Supplies, Credit Accounts Payable

Purchasing supplies on account increases the Supplies asset (debit) and creates a liability in Accounts Payable (credit).

A compound journal entry is one that:

Answer: Involves more than two accounts

A compound journal entry involves three or more accounts, though total debits must still equal total credits.

After posting from the general journal, the account number is written in the journal's posting reference column to indicate:

Answer: That the entry has been posted to the ledger

Recording the ledger account number in the journal's PR column confirms the entry has been successfully posted.

A business receives a $500 cash payment from a customer on a previously recorded account receivable. Which entry is correct?

Answer: Debit Cash $500, Credit Accounts Receivable $500

Collecting on an account receivable increases Cash (debit) and reduces the Accounts Receivable asset (credit).

In which book of original entry are most routine business transactions first recorded?

Answer: The general journal

The general journal is the book of original entry where transactions are first recorded in chronological order.

What does a credit entry to the owner's Capital account represent?

Answer: An increase in owner's equity

Credits increase equity accounts, so a credit to Capital increases the owner's equity stake in the business.

An error discovered AFTER a journal entry has been posted should be corrected by:

Answer: Recording a correcting journal entry

Once posted, errors must be corrected with a new correcting journal entry rather than altering the original records.