What is the journal entry for purchasing inventory on credit for $500?

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Q: What is the journal entry for purchasing inventory on credit for $500?

Solution: The correct entry is to debit Inventory and credit Accounts Payable, reflecting the increase in inventory and the obligation to pay.

Steps: 6

Step 1: Understand that purchasing inventory means you are buying goods to sell later.
Step 2: Recognize that buying on credit means you will pay for the inventory later, not immediately.
Step 3: Identify the amount of the purchase, which is $500.
Step 4: In accounting, when you buy inventory, you increase your Inventory account. This is done by debiting the Inventory account for $500.
Step 5: Since you are buying on credit, you also create a liability to pay later. This is done by crediting the Accounts Payable account for $500.
Step 6: Write the journal entry: Debit Inventory $500 and Credit Accounts Payable $500.