Question

how would you journalize the transaction \paid cash for merchandise\ in an expanded journal? debit purchases and credit cash debit merchandise expense and credit cash debit purchases and credit accounts payable debit cash and credit capital

Explanation:

When a company pays cash for merchandise, it acquires an asset (merchandise, which is recorded in the Purchases account in a periodic inventory system) and reduces the Cash asset. According to the double - entry accounting system, an increase in an asset (Purchases) is debited, and a decrease in an asset (Cash) is credited.

• For the option “debit Merchandise Expense and credit Cash”: Merchandise is an asset, not an expense at the time of purchase (unless using a perpetual system with a different treatment, but in a general journalizing for the described transaction in an expanded journal context, Purchases is more appropriate).
• For the option “debit Purchases and credit Accounts Payable”: This would be the case if the merchandise was purchased on credit, not when cash is paid.
• For the option “debit Cash and credit Capital”: This does not reflect the acquisition of merchandise and the payment of cash.

Answer:

debit Purchases and credit Cash