Question

What's the correct entry for $100 purchase of supplies on credit?

a. Debit Cash: $100 & Credit Supplies: $100
b. Debit Accounts Payable: $100 & Credit Cash: $100
c. Debit Supplies: $100 & Credit Accounts Payable: $100
d. Debit Accounts Payable: $100 & Credit Supplies: $100
e. Debit Accounts Receivable: $100 & Credit Cash: $100

Answer 1

The correct entry for a $100 purchase of supplies on credit is to debit the supplies account and to credit the accounts payable account, reflecting the increased supplies and the new liability without cash changing hands.

Step-by-step explanation:

The correct entry for a $100 purchase of supplies on credit is to debit the supplies account and credit the accounts payable account. This reflects that the supplies have been received and now the company has an obligation to pay the supplier in the future. Since the purchase is on credit, no cash transaction occurs at this time.

Therefore, the correct answer is:

c. Debit Supplies: $100 & Credit Accounts Payable: $100

When a company buys supplies on credit, it means they are agreeing to pay the supplier at a later date. This creates an accounts payable, which is a liability for the company. The supplies account, an asset, increases showing that the company now has more supplies in stock.