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When recording a sale that includes both billable amounts and add-on amounts for each product or service, which journal entry correctly reflects the use of debits and credits to show the total sum for each item?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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Which of the following journal entries correctly records the purchase of office supplies for cash?
A
Debit Office Supplies; Credit Accounts Receivable
B
Debit Office Supplies; Credit Cash
C
Debit Cash; Credit Office Supplies
D
Debit Accounts Payable; Credit Office Supplies
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Understand the nature of the transaction: The purchase of office supplies for cash means that office supplies are being acquired, and cash is being used to pay for them. This affects the Office Supplies account and the Cash account.
Identify the accounts involved: The Office Supplies account represents an asset, and the Cash account also represents an asset. When office supplies are purchased, the Office Supplies account increases, and the Cash account decreases.
Determine the type of account changes: An increase in an asset account (Office Supplies) is recorded as a debit, while a decrease in an asset account (Cash) is recorded as a credit.
Apply the rules of double-entry accounting: For every transaction, debits must equal credits. In this case, you would debit the Office Supplies account to reflect the increase in supplies and credit the Cash account to reflect the decrease in cash.
Review the journal entry options: The correct journal entry is 'Debit Office Supplies; Credit Cash,' as it accurately reflects the increase in office supplies and the decrease in cash due to the purchase.
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