If a company purchases office supplies for \$500 cash, which of the following journal entries correctly records the transaction?

• A. Debit Office Supplies \$500; Credit Cash \$500
• B. Debit Cash \$500; Credit Office Supplies \$500
• C. Debit Office Supplies \$500; Credit Accounts Payable \$500
• D. Debit Accounts Payable \$500; Credit Cash \$500

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the nature of the transaction. The company is purchasing office supplies for \$500 and paying in cash. This means the company is acquiring an asset (Office Supplies) and reducing another asset (Cash).
2. Step 2: Recall the accounting equation: Assets = Liabilities + Equity. Since office supplies are an asset and cash is also an asset, this transaction affects only the asset side of the equation.
3. Step 3: Determine the accounts involved. The accounts affected are 'Office Supplies' (an asset account) and 'Cash' (another asset account).
4. Step 4: Apply the rules of debits and credits. An increase in an asset account (Office Supplies) is recorded as a debit, while a decrease in an asset account (Cash) is recorded as a credit.
5. Step 5: Write the journal entry. Debit 'Office Supplies' for \$500 to reflect the increase in office supplies, and credit 'Cash' for \$500 to reflect the decrease in cash.