Which of the following events would typically require a journal entry involving debits and credits in real-time financial reporting?

• A. A manager drafts a budget for the next year.
• B. An employee attends a training seminar.
• C. A company purchases inventory on credit.
• D. A company updates its organizational chart.

Answer: (C)

Verified step by step guidance

1. Understand the concept of journal entries: Journal entries are used to record financial transactions in the accounting system. They involve debits and credits to maintain the accounting equation (Assets = Liabilities + Equity).
2. Identify the nature of each event: Analyze whether the event involves a financial transaction that impacts the company's accounts. For example, drafting a budget or updating an organizational chart does not involve financial transactions, while purchasing inventory on credit does.
3. Focus on the event 'A company purchases inventory on credit': This event involves acquiring inventory (an asset) and creating a liability (accounts payable) since the purchase is made on credit.
4. Determine the accounts affected: The inventory account (an asset) will be debited to reflect the increase in inventory, and the accounts payable account (a liability) will be credited to reflect the obligation to pay later.
5. Write the journal entry: Using the double-entry accounting system, the journal entry would be structured as follows: Debit the Inventory account and Credit the Accounts Payable account. This ensures the accounting equation remains balanced.