Question

Which of the following transactions decrease cash? 1) Purchase inventory from cash 2) Pay trade accounts payable 3) Accruing operating expenses 4) Purchase stock in R&D partner 5) Charging depreciation

Answer 1

Answer:

The answer is:

1) Purchase inventory from cash;

2) Pay trade accounts payable

4) Purchase stock in R&D partner

Explanation:

Please see the below for detailed explanations:

1) Purchase inventory from cash: Cash should decrease as cash payment needs to be made to supplier in exchange for inventory. The usual entry is Dr Inventory, Cr Cash;

2) Pay trade accounts payable: Cash balance should fall as cash will be transferred to creditor for settling Account Payable. The usual entry is Dr Account Payable Cr Cash;

3) Accruing operating expenses: this is to record expenses incurs but not yet paid or expenses had already prepaid in the past but had not yet incurred. Thus, cash balance will not be changed.

4) Purchase stock in R&D partner: Cash should decrease as cash payment needs to be made to partner in exchange for inventory.

5) Depreciation expenses: this is a non-cash expense.