When goods are purchased on credit for resale, which double-entry treatment is normally made?
Correct answer: A. Debit purchases and credit accounts payable
- A. Debit purchases and credit accounts payable
- B. Debit accounts payable and credit purchases
- C. Debit cash and credit purchases
- D. Debit sales and credit accounts payable
Explanation
The purchase account is debited to record the cost of goods acquired, while the supplier's payable is credited because the liability increases. Cash is not involved in a credit purchase.
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Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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