Learning unit 3: Quiz 2

Transaction 4 January 2022

The first step when dealing with a transaction is to identify the affected accounts. The transaction on
4 January relates to the purchase of stationery (inventory) on credit. The first affected account is
therefore inventory. The inventory was purchased on credit. The second account affected is therefore
accounts payable. NB: The inventory account is used because the business uses the perpetual
inventory system.

The inventory account will increase with the amount paid. On the other hand, the accounts payable
account will increase because the business will now owe the supplier the purchase price of the
stationery.

Accounts payable is classified as a liability. The rule for liabilities is that these accounts increase on
the credit side and decrease on the debit side. In our example the Accounts payables account will
therefor increase on the credit side. Inventory is classified as an asset. The rule for assets is that these
accounts increase on the debit side and decrease on the credit side. Therefore, the inventory account
will be debited.

Dr Inventory Cr
2022
Jan 4 Accounts payables 5 000 00

Dr Accounts payables Cr

2022
5 000 00
Jan 4 Inventory