What is the appropriate journal entry to record inventory purchased from a supplier using credit or cash?

When recording the purchase of inventory from a supplier, it's essential to recognize that the inventory is an asset to the company. The appropriate journal entry reflects an increase in the inventory account and either a decrease in cash or an increase in accounts payable, depending on whether the purchase was made using cash or credit.

The correct entry starts with a debit to the Inventory account. A debit to inventory signifies that the company has acquired a new asset, which is crucial as it reflects the addition to the resources the company can use to generate revenue. The offset to this transaction can either be a credit to Accounts Payable (if the purchase was made on credit) or a credit to Cash (if the purchase was made with cash).

This structure maintains the accounting equation (Assets = Liabilities + Owner's Equity), ensuring that increases in assets (inventory) are appropriately balanced with liabilities (if credit is used) or reductions in assets (if cash is used). Thus, this entry effectively captures the economic reality of the transaction while maintaining the integrity of the financial records.