Which journal entries correctly record (a) purchase of supplies on credit for $300; (b) payment of $200 on accounts payable?

• A. Debit Accounts Payable 200; Credit Cash 200. Debit Supplies 300; Credit Accounts Payable 300
• B. Debit Supplies 300; Credit Accounts Payable 300. Debit Accounts Payable 200; Credit Cash 200
• C. Debit Supplies 300; Credit Cash 300. Debit Cash 200; Credit Accounts Payable 200
• D. Debit Accounts Payable 300; Credit Cash 300. Debit Supplies 200; Credit Accounts Payable 200

Answer: (B)

In double-entry accounting, every transaction affects at least two accounts with equal debits and credits. When you purchase supplies on credit, you gain an asset (supplies) and you incur a liability (accounts payable). So you record a debit to Supplies for 300 and a credit to Accounts Payable for 300. For the payment on accounts payable, you’re reducing what you owe (the liability) and also reducing cash. That means you debit Accounts Payable for 200 and credit Cash for 200. This pair of entries matches the two described actions: acquiring supplies on credit increases assets and liabilities, then paying down part of the liability decreases both the liability and cash. This set of entries is the correct representation of the transactions.