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When ABC Insurance Company accepts a life insurance application that contains unanswered questions, which journal entry is most appropriate to record the initial premium payment received from the applicant?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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Which account is debited in the journal entry to record selling and administrative salaries?
A
Cash
B
Sales Revenue
C
Accounts Payable
D
Salaries Expense
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Understand the nature of the transaction: Selling and administrative salaries are considered operating expenses incurred by the business. These expenses are recorded in the Salaries Expense account.
Recall the rules of debit and credit: Expenses increase on the debit side, as they reduce the equity of the business. Therefore, the Salaries Expense account will be debited.
Identify the corresponding credit account: The credit side of the journal entry will depend on how the salaries are paid. If paid in cash, the Cash account is credited. If not yet paid, the Accounts Payable account is credited.
Construct the journal entry: Debit the Salaries Expense account to record the increase in expenses, and credit the appropriate account (Cash or Accounts Payable) to reflect the payment or liability.
Review the journal entry: Ensure that the debit and credit amounts are equal, and confirm that the accounts used accurately reflect the transaction.
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