Learning unit 3: Quiz 2

Transaction 10 January 2022

The first step when dealing with a transaction is to identify the affected accounts. The transaction on
10 January relates to the payment of carriage on purchases. Since the business makes use of the
perpetual inventory system, carriage on purchases will form part of the cost of inventory. The first
affected account is therefore inventory. The inventory was paid with cash. The second account
affected is therefore bank.

The inventory account will increase with the amount paid. On the other hand, the bank account will
decrease because the business paid cash.

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

Dr Inventory Cr
2022
Jan 10 Bank 62 00

Dr Bank Cr

2022
62 00
Jan 10 Inventory