Question

Which of the following is included in the journal entry to purchase materials on credit for factory use?

1) Debit Accounts Payable, Credit Cash
2) Debit Materials Inventory, Credit Accounts Payable
3) Debit Factory Use Expense, Credit Accounts Payable
4) Debit Accounts Receivable, Credit Cash

Answer 1

The correct entry to record a purchase of materials on credit for factory use is to debit Materials Inventory and credit Accounts Payable, reflecting an increase in both the assets and liabilities of the company.

Step-by-step explanation:

The correct journal entry to purchase materials on credit for factory use is:

Debit Materials Inventory, Credit Accounts Payable

This entry is recorded because when you purchase materials on credit, the company receives the materials and therefore must increase the asset account (Materials Inventory) to reflect the new materials on hand. At the same time, because the materials are purchased on credit, the company incurs a liability, which increases the accounts payable. This reflects the company's obligation to pay for the materials in the future.

A quick explanation of each account involved:

• Materials Inventory is an asset account and is debited when increased.
• Accounts Payable is a liability account and is credited when increased.

Therefore, option 2) Debit Materials Inventory, Credit Accounts Payable is the correct answer.