In the transaction where caskets are purchased on account, the entry would credit which account?

• A. Accounts payable
• B. Inventory
• C. Cash
• D. Revenue

Answer: (A)

When you purchase caskets on account, you’re acquiring inventory now but promising to pay later. In double-entry accounting, increasing an asset (inventory) is recorded with a debit, while increasing a liability (what you owe) is recorded with a credit. Since the purchase creates a liability to the supplier, the credit goes to Accounts Payable. Cash would only be affected if payment were made at the time of purchase, and revenue has no relation to this transaction.