If a company purchases office supplies for \$500 cash, how should the journal entry be recorded in terms of debits and credits?

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

Answer: (B)

Verified step by step guidance

1. Understand the nature of the transaction: The company is purchasing office supplies for \$500 cash. This means the company is acquiring an asset (office supplies) and paying for it immediately using cash.
2. Recall the basic accounting principle: Every journal entry must have at least one debit and one credit, and the total debits must equal the total credits.
3. Identify the accounts involved: The accounts affected are 'Office Supplies' (an asset account) and 'Cash' (another asset account). Since office supplies are being acquired, this account will be debited. Since cash is being used to pay for the supplies, the cash account will be credited.
4. Determine the correct journal entry: Debit the 'Office Supplies' account for \$500 to reflect the increase in assets. Credit the 'Cash' account for \$500 to reflect the decrease in cash.
5. Write the journal entry: The journal entry will be formatted as follows: Debit Office Supplies \$500; Credit Cash \$500. This ensures the transaction is properly recorded in the company's books.