The Goods Company purchased goods from its suppliers. The good...

Question

The Goods Company purchased goods from its suppliers. The goods cost $20,000. Record the transaction.

Journal entry format showing assets, liabilities, and equity for transaction analysis.

Accepted Answer

Alright, let's try this one. The goods company purchased goods from its suppliers. The goods cost $20,000 Record the transaction. Okay, so in this situation, the company is buying goods. We're going to assume that they buy goods to resell them, right? What they do is that they buy goods, they have the goods, and then they find customers to sell it at a higher price, right? That's how they're gonna make their money. But in this case, they're not selling anything, they're just buying goods, right? So in this case, what's gonna happen is they're increasing their inventory of goods, right? So what we're gonna do is we're gonna increase our inventory and how did how did we pay for that inventory? We paid for it with cash, right? So the goods let me circle the goods, that was inventory. Oops. Inventory right here. Let me scroll up a little so you can see that. Inventory, let me also write it a little better. I don't like how that looks. Okay. And the $20,000 we paid for that inventory with cash. Right? It sold us $20,000 we paid for it with cash, right? So what is inventory? Is inventory an asset, a liability, equity? Well, it's an asset, right? It's an asset because it's goods that we own, they're on our they're in our warehouse or something and we're waiting to sell it to customers, they have some value and it's stored there in the warehouse where we're waiting to sell those goods. So inventory is an asset and cash is also an asset, right? So what's going to happen here? Did inventory go up or down? It went up, right? We bought some goods so we have more inventory. So how do we increase the value of inventory? Well remember that assets go up with debits and down with credits, right? So since inventory is going up, we want to debit inventory. So inventory, we're going to put here and it's $20,000 worth, right? We spent $20,000 that's the value of the inventory. And then we have the other side, the credit side, right? Our debits have to equal our credits, so we're going to credit the cash account. Okay? Cash is going to go down by 20,000. Our debits equal our credits. This journal entry is complete. We've included all the information that was given to us, right? So what would happen after this journal entry? We would see that the value of our inventory account would go up by 20,000 and the value in our cash account would go down by 20,000. Right? And just like in our example, we're dealing with 2 assets here. Right? I'm actually going to write this here. We're gonna have inventory is an asset, cash is also an asset. Right? So since they're both assets, the assets first, the inventory increases our assets by 20,000 and then the cash decreases our assets by 20,000, right? We got rid of 20,000 in cash to get this inventory. So again, our level of assets is going to stay the same, all right? So these are some simple examples. We're going to do a lot more examples to get you ready, to analyze journal entries and analyze these transactions, alright? So let's go ahead and pause here and move on to the next video.

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The Goods Company purchased goods from its suppliers. The goods cost \$20,000. Record the transaction.

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