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Why are there two account titles in the amount column of the purchases journal?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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When an electronic funds transfer (EFT) is used to pay cash on account, which account is credited in the journal entry?
A
Accounts Payable
B
Accounts Receivable
C
Cash
D
Sales Revenue
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Understand the nature of an electronic funds transfer (EFT): An EFT is a method of transferring money electronically from one account to another, often used to settle obligations such as accounts payable.
Identify the accounts involved in the transaction: When paying cash on account using EFT, the accounts affected are typically 'Cash' and 'Accounts Payable.'
Determine the impact on 'Accounts Payable': Since the payment is made to settle an obligation, the 'Accounts Payable' account is debited to reduce the liability.
Determine the impact on 'Cash': The 'Cash' account is credited because the payment reduces the company's cash balance.
Record the journal entry: The journal entry for this transaction would involve debiting 'Accounts Payable' and crediting 'Cash' to reflect the payment made using EFT.
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