The journal entry for Lonneisha's Quilt Shop's $550 merchandise purchase from Patch Quilt Distributors is a debit to Inventory and a credit to Cash, each for $550.
Lonneisha's Quilt Shop's transaction of purchasing merchandise from Patch Quilt Distributors for $550 cash can be recorded with a simple double-entry bookkeeping system. To record this transaction, you would make the following journal entry:
- Debit Inventory for $550
- Credit Cash for $550
This journal entry reflects an increase in inventory, which is an asset, and a decrease in cash, which is also an asset. Since Lonneisha's Quilt Shop paid in cash, there is a direct decrease in the cash account and no liability is created.