What is the journal entry for recording the purchase of inventory on credit?

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Question: What is the journal entry for recording the purchase of inventory on credit?

Options:

Correct Answer: Debit Inventory, Credit Accounts Payable

Solution:

The correct entry is to debit Inventory and credit Accounts Payable to reflect the purchase of inventory on credit.

What is the journal entry for recording the purchase of inventory on credit?

What is the journal entry for recording 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. Since we are purchasing inventory, we will increase the Inventory account.
Step 3: Record the increase in Inventory by debiting it. This means we add the amount of the inventory purchase to the Inventory account.
Step 4: Since the purchase is on credit, we will also increase our liability. This is done by crediting the Accounts Payable account.
Step 5: Write the journal entry. It will look like this: Debit Inventory (for the amount purchased) and Credit Accounts Payable (for the same amount).

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