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### Horngren'S Financial And Managerial Accounting

Book edition 6th
Author(s) Tracie L. Miller-Nobles, Brenda L. Mattison
Pages 992 pages
ISBN 9780134486833

# Question: Give the journal entry for raw materials purchased on account. Explain how this transaction affects the accounting equation.

 Date Particulars Debit ($) Credit ($) Raw material inventory XXX Accounts payable XXX

This transaction increases the raw material inventory (Assets) and increases the liabilitiy (accounts payable) of the company

See the step by step solution

## Step 1: Raw material inventory

Raw material means the material used by the company to manufacture the finished goods. It is shown as the current assets in the balance sheet of the company. The purchase of raw material increases its balance in the company’s balance sheet.

## Step 2: Accounts payable

Accounts payable means the amount due to vendors for the goods or services received that have not yet been paid for. It is treated as the current liability in the balance sheet of the company. The purchase of raw material on account increases the balance of accounts payable on the liabilities’ side of the company’s balance sheet.