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A business buys $200 of supplies on account and is invoiced by the vendor. What is the correct journal entry?
ADebit Supplies Expense $200; credit Accounts Payable $200
BDebit Cash $200; credit Supplies Expense $200
CDebit Supplies Expense $200; credit Cash $200
DDebit Accounts Payable $200; credit Supplies Expense $200
Answer & Solution
Correct answer: A. Debit Supplies Expense $200; credit Accounts Payable $200
1. The expense is recorded when the goods are received, so Supplies Expense is debited.
2. No cash is paid yet; the business owes the vendor, creating a liability.
3. Accounts Payable, a liability that increases, is credited.
4. Option C wrongly credits Cash for an on-account purchase; option D reverses; option A is nonsensical.
5. Therefore debit Supplies Expense $200 and credit Accounts Payable $200.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.6 "Expense Transactions on Account", p.32_
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