What is the journal entry to record the purchase of inventory on credit?
Practice Questions
Q1
What is the journal entry to record the purchase of inventory on credit?
Debit Inventory, Credit Accounts Payable
Debit Accounts Payable, Credit Inventory
Debit Cash, Credit Inventory
Debit Inventory, Credit Cash
Questions & Step-by-Step Solutions
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]'.
