In the periodic inventory system, what is the journal entry to record the payment of accounts payable for inventory purchases?Question 30Answera.Debit Accounts Payable, Credit Cashb.Debit Cash, Credit Accounts Payablec.Debit Inventory, Credit Cashd.Debit Cash, Credit Inventory
Question
In the periodic inventory system, what is the journal entry to record the payment of accounts payable for inventory purchases?Question 30Answera.Debit Accounts Payable, Credit Cashb.Debit Cash, Credit Accounts Payablec.Debit Inventory, Credit Cashd.Debit Cash, Credit Inventory
Solution
The correct answer is a. Debit Accounts Payable, Credit Cash.
Here is the step by step process:
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Identify the accounts involved: In this case, the accounts involved are Accounts Payable and Cash.
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Determine the nature of the transaction: The company is paying off its accounts payable for inventory purchases. This means cash is going out of the business (a decrease in asset) and the liability (Accounts Payable) is also decreasing.
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Apply the rules of debit and credit: In accounting, if an asset account (like Cash) decreases, it is credited. On the other hand, if a liability account (like Accounts Payable) decreases, it is debited.
So, the journal entry to record the payment of accounts payable for inventory purchases in the periodic inventory system would be:
Debit: Accounts Payable Credit: Cash
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