When Shariz receives a vendor invoice for goods purchased on credit, which journal entry should be recorded?

• A. Debit Cash; Credit Accounts Payable
• B. Debit Accounts Receivable; Credit Inventory
• C. Debit Inventory; Credit Accounts Payable
• D. Debit Accounts Payable; Credit Inventory

Answer: (C)

Verified step by step guidance

1. Understand the nature of the transaction: Shariz has received a vendor invoice for goods purchased on credit. This means Shariz has acquired inventory but has not yet paid for it, creating a liability (Accounts Payable).
2. Identify the accounts involved: The transaction affects the Inventory account (an asset account) and the Accounts Payable account (a liability account).
3. Determine the impact on each account: Since inventory is being acquired, the Inventory account should be increased (debited). Since the purchase is on credit, the Accounts Payable account should also be increased (credited).
4. Apply the double-entry accounting principle: For every debit, there must be an equal credit. In this case, Debit Inventory and Credit Accounts Payable to reflect the increase in assets and liabilities respectively.
5. Record the journal entry: The journal entry would be formatted as follows: Debit Inventory (to increase assets) and Credit Accounts Payable (to increase liabilities). This ensures the accounting equation remains balanced.