Which journal entry correctly records the purchase of raw materials on credit?

Which journal entry correctly records the purchase of raw materials on credit?

• A. Credit to Raw Materials and Debit to Accounts Payable or Cash
• B. Debit Raw Materials and Credit Accounts Payable or Cash
• C. Credit to Raw Materials and Credit Accounts Payable or Cash
• D. Debit Raw Materials and Debit Accounts Payable or Cash

Answer: (B)

Recording a purchase of raw materials on credit involves increasing an asset and recognizing a liability. In double-entry accounting, assets are debited to show an increase, while liabilities are credited to show an obligation. Therefore, the correct entry is to Debit Raw Materials and Credit Accounts Payable. This reflects adding to inventory and owing money to the supplier. If it were paid immediately, you’d Credit Cash instead. Other formats would either debit the liability, credit the asset, or debit both sides, which doesn’t match the way asset increases and liability increases are recorded.

Recording a purchase of raw materials on credit involves increasing an asset and recognizing a liability. In double-entry accounting, assets are debited to show an increase, while liabilities are credited to show an obligation. Therefore, the correct entry is to Debit Raw Materials and Credit Accounts Payable. This reflects adding to inventory and owing money to the supplier. If it were paid immediately, you’d Credit Cash instead. Other formats would either debit the liability, credit the asset, or debit both sides, which doesn’t match the way asset increases and liability increases are recorded.