ABC Corporation Invoice Payment Journal Entry

What is the journal entry for ABC Corporation's payment of an invoice?

ABC Corporation pays an invoice for $350 in time to receive a 3% discount. The journal entry for the payment of this invoice is debit Accounts Payable?

Answer:

The correct journal entry for the payment of the invoice with a 3% discount would be debit Accounts Payable for $340, debit Inventory for $10, and credit Cash for $350.

When ABC Corporation pays an invoice for $350 in time to receive a 3% discount, the journal entry for this transaction would involve debiting Accounts Payable for the reduced amount of $340 to account for the discount taken. Additionally, Inventory would be debited for $10 to reflect the expense associated with the purchase, and Cash would be credited for the total amount of $350 paid.

It is important to accurately record journal entries to ensure the financial statements reflect the company's transactions and financial position correctly. By debiting the appropriate accounts and crediting Cash, ABC Corporation maintains accurate records of its financial activities.