Question

Specter Consulting purchased $8,400 of supplies and paid cash immediately. Which of the following general journal entries will Specter Consulting make to record this transaction?

1) Debit Supplies Expense $8,400; Credit Cash $8,400
2) Debit Cash $8,400; Credit Supplies Expense $8,400
3) Debit Supplies Expense $8,400; Credit Accounts Payable $8,400
4) Debit Accounts Payable $8,400; Credit Supplies Expense $8,400

Answer 1

Specter Consulting will record the purchase of supplies by debiting the Supplies account and crediting the Cash account with the amount of $8,400.

Step-by-step explanation:

When Specter Consulting purchases $8,400 of supplies and pays in cash right away, they should record this transaction by making the following general journal entry: Debit Supplies $8,400; Credit Cash $8,400. This entry reflects that the company has increased its supply inventory and decreased its cash balance by the amount of the purchase. Supplies are an asset and not an expense at the time of purchase, hence 'Supplies Expense' is not the correct account to be debited in this instance.