Debits and Credits Study Appendix 15B. Determine for the following transactions whether the account named in parentheses is to be debited or credited: 1. Sold merchandise (Merchandise Inventory), $1,000 2. Received cash from customers on accounts due (Accounts Receivable), $2,450 3. Paid rent in advance (Prepaid Expenses), $1,250 4. Borrowed money from First National Bank (Notes Payable), $12,000 5. Paid dividends (Cash), $800 6. Delivered merchandise to customers (Merchandise Inventory), $3,500 7. Paid O’Brien Associates $3,000 owed them (Accounts Payable)8. Bought merchandise on open account (Accounts Payable), $5,400

Explanation:

The following accounts are debited or credited

1. Sold merchandise (Merchandise Inventory), $1,000 = Since merchandise inventory is sold so this account should be credited

2. Received cash from customers on accounts due (Accounts Receivable), $2,450 = Since cash is received so we debited the cash account and credited the account  receivable account

3. Paid rent in advance (Prepaid Expenses), $1,250 = Since the rent is paid in advance so we debited the prepaid expenses account and credited the cash account

4. Borrowed money from First National Bank (Notes Payable), $12,000 = Since the money is borrowed so we debited the cash account and credited the note payable account

5. Paid dividends (Cash), $800 = Since the dividend is paid so we debited the dividend account and credited the cash account

6. Delivered merchandise to customers (Merchandise Inventory), $3,500  = Since the merchandise is delivered to customers so we credited the merchandise inventory account

7. Paid O’Brien Associates $3,000 owed them (Accounts Payable) = Since the amount is paid so we debited the account payable and credited the cash account

8. Bought merchandise on open account (Accounts Payable), $5,400 = Since the merchandise is bought on account so we debited the merchandise inventory and credited the account payable account                    

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