Uptown Company purchases $4,000 of inventory on account.Uptown Company should debit ________.
A) Cash for $1,000, and credit Accounts Payable for $4,000
B) Cash for $1,000, and credit Note Payable for $4,000
C) Inventory for $4,000, and credit Cash for $4,000
D) Inventory for $4,000, and credit Accounts Payable for $4,000

Question

Quizplus · Accepted Answer

When inventory is purchased on account (i.e. on credit), the appropriate journal entry would be to debit Inventory (as it is an asset that has been acquired) and credit Accounts Payable (as it is a liability that represents the amount owed to the seller). Therefore, the correct answer is to debit Inventory for $4,000 and credit Accounts Payable for $4,000. Choice A is incorrect because there was no cash paid, and Choice B is incorrect because it suggests the purchase was made with a note payable. Choice C is also incorrect because inventory was acquired on account, not with cash.

Uptown Company Purchases $4,000 of Inventory on Account