Purchases of inventory on credit should involve _______.
A)debits to inventory and credits to payables
B)debits to payables and credits to inventory
C)debits to payables and credits to expenses
D)debits to expenses and credits to cash

Question

Quizplus · Accepted Answer

When a business purchases inventory on credit, the double-entry accounting system requires that the inventory account is debited (increased) to reflect the increase in inventory on hand. At the same time, the accounts payable account is credited (increased) to reflect the fact that the business owes money to its supplier for the inventory that it has purchased on credit. Therefore, the correct option is A - debits to inventory and credits to payables. Option B is the opposite and would decrease inventory and increase payables which is not correct. Option C is incorrect because expenses should not be involved in this transaction. Option D is incorrect because the business did not pay cash for the inventory, so there is no cash involved.

Purchases of Inventory on Credit Should Involve _______