What is the journal entry for purchasing inventory on credit?
Practice Questions
1 question
Q1
What is the journal entry for purchasing inventory on credit?
Debit Inventory, Credit Cash
Debit Inventory, Credit Accounts Payable
Debit Accounts Payable, Credit Inventory
Debit Cash, Credit Inventory
When inventory is purchased on credit, the inventory account is debited to increase it, and accounts payable is credited to reflect the liability.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the journal entry for purchasing inventory on credit?
Solution: When inventory is purchased on credit, the inventory account is debited to increase it, and accounts payable is credited to reflect the liability.
Steps: 6
Step 1: Identify that you are purchasing inventory on credit.
Step 2: Understand that purchasing inventory means you are increasing your inventory account.
Step 3: Record the increase in the inventory account by debiting it. This means you add the amount of the inventory to the inventory account.
Step 4: Recognize that since you are buying on credit, you now owe money. This creates a liability.
Step 5: Record the liability by crediting the accounts payable account. This means you add the amount you owe to the accounts payable account.
Step 6: Write the journal entry: Debit Inventory and Credit Accounts Payable.
