Green Cleaning purchased $500 of office supplies on credit.The company's policy is to initially record prepaid and unearned items in balance sheet accounts.Which of the following general journal entries will Green Cleaning make to record this transaction?

Question

Quizplus · Accepted Answer

Since Green Cleaning purchased office supplies on credit, they have not yet paid for them. Therefore, the transaction should be recorded as a debit to Office supplies (an asset account) and a credit to Accounts payable (a liability account). This reflects that the company has acquired an asset but owes money for it, and will need to pay for it at a later date.

Green Cleaning Purchased $500 of Office Supplies on Credit