What is the journal entry to record the purchase of inventory on credit?

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Question: What is the journal entry to record the purchase of inventory on credit?

Options:

Correct Answer: Debit Inventory, Credit Accounts Payable

Solution:

The correct entry is to debit Inventory to increase it and credit Accounts Payable to reflect the liability.

What is the journal entry to record the purchase of inventory on credit?

What is the journal entry to record the purchase of inventory on credit?

Step 1: Identify the accounts involved in the transaction. In this case, we have 'Inventory' and 'Accounts Payable'.
Step 2: Determine the action for each account. We need to increase the Inventory account because we are purchasing inventory. We also need to increase the Accounts Payable account because we are buying on credit.
Step 3: Record the increase in Inventory by debiting it. This means we write 'Debit Inventory' for the amount of the purchase.
Step 4: Record the increase in Accounts Payable by crediting it. This means we write 'Credit Accounts Payable' for the same amount.
Step 5: Combine the entries into a journal format. It will look like this: 'Debit Inventory [amount]' and 'Credit Accounts Payable [amount]'.

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