Question

For each of the following events in a conversion cycle please identify the appropriate journal entry. Please use this format DR. (name the account) CR (name the account) Assume normal business characteristics. (1) Purchase raw materials

Answer 1

The journal entry for purchasing raw materials typically involves debiting Inventory and crediting Accounts Payable or Cash, depending on the payment method used.

Step-by-step explanation:

When a company purchases raw materials for use in its production process, the appropriate journal entry to record this transaction in a conversion cycle would typically involve an increase in inventory (an asset) and a corresponding increase in accounts payable (a liability) or a cash outflow, depending on how the purchase is financed.

The journal entry would generally follow this format:

• DR. Inventory
• CR. Accounts Payable (or Cash, if paid immediately)

This reflects that the company now has more materials available for use, which should be shown as an increase in the assets on the balance sheet, while it has either increased its obligations (accounts payable) or decreased its cash balance.