When a firm pays for supplies using a credit card, which account should be credited in the journal entry?

• A. Cash
• B. Accounts Payable
• C. Supplies Expense
• D. Credit Card Payable

Answer: (D)

Verified step by step guidance

1. Understand the transaction: The firm is paying for supplies using a credit card. This means the firm is incurring a liability (Credit Card Payable) rather than immediately using cash or creating an accounts payable entry.
2. Identify the accounts involved: The accounts affected are 'Supplies Expense' (or 'Supplies' if the purchase is recorded as an asset) and 'Credit Card Payable' (a liability account).
3. Determine the journal entry structure: In every journal entry, there must be at least one debit and one credit. Debits increase expenses or assets, while credits increase liabilities or equity.
4. Record the debit: Debit the 'Supplies Expense' account (or 'Supplies' if treated as an asset) to reflect the cost of the supplies purchased.
5. Record the credit: Credit the 'Credit Card Payable' account to recognize the liability incurred by using the credit card for the purchase.