You purchased inventory from your vendor and paid cash. In your journal entry, which account would you debit?

You purchased inventory from your vendor and paid cash. In your journal entry, which account would you debit?

• A. Cash account
• B. Office supplies account
• C. Inventory account
• D. Accounts payable

Answer: (C)

When you buy inventory, you’re increasing an asset that you’ll sell, so you record a debit to the Inventory account. In double-entry bookkeeping, increases to assets are reflected on the debit side. Since you paid cash, the other side of the entry would be a credit to Cash to show the cash outflow. That’s why the journal entry is Debit Inventory and Credit Cash. This differs from the other possibilities: debiting Cash would imply increasing cash, which isn’t the case when you’ve paid cash for inventory. Debiting Office Supplies would only apply if you purchased office supplies, not inventory for resale. Debits to Accounts Payable would be used if you bought on credit and hadn’t paid yet.

When you buy inventory, you’re increasing an asset that you’ll sell, so you record a debit to the Inventory account. In double-entry bookkeeping, increases to assets are reflected on the debit side. Since you paid cash, the other side of the entry would be a credit to Cash to show the cash outflow. That’s why the journal entry is Debit Inventory and Credit Cash.

This differs from the other possibilities: debiting Cash would imply increasing cash, which isn’t the case when you’ve paid cash for inventory. Debiting Office Supplies would only apply if you purchased office supplies, not inventory for resale. Debits to Accounts Payable would be used if you bought on credit and hadn’t paid yet.