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

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

Answer: (B)

Verified step by step guidance

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. Identify the accounts involved: The accounts affected are 'Office Supplies' (an asset account) and 'Cash' (another asset account).
3. Determine the type of account changes: Since office supplies are being acquired, the 'Office Supplies' account will increase, which requires a debit entry. Since cash is being used to pay for the supplies, the 'Cash' account will decrease, which requires a credit entry.
4. Apply the double-entry accounting principle: For every transaction, debits must equal credits. In this case, debit 'Office Supplies' for \$500 and credit 'Cash' for \$500.
5. Record the journal entry: The correct journal entry is: Debit Office Supplies \$500; Credit Cash \$500. This reflects the increase in office supplies and the decrease in cash.