Question

The company paid cash of $1,500 on its account with one of its suppliers from whom it regularly purchases inventory. The inventory purchase itself was recorded previously. Which ONE of the following would be included in the journal entry necessary to record this payment on account?
a DEBIT to Accounts Payable for $1,500
b CREDIT to Inventory for $1,500
c DEBIT to Inventory for $1,500
d DEBIT to Cash for $1,500
e CREDIT to Accounts Payable for $1,500

Answer 1

Answer:

A) DEBIT to Accounts Payable for $1,500

Explanation:

The records that the company should make regarding the payment of the purchased merchandise is:

• Debit record Accounts Payable account 1,500 (since Accounts Payable is a liability account, when it decreases it should be debited)
• Credit record Cash account 1,500 (since Cash is an asset account, when it decreases it should be credited)