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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Journal entry for asset purchase

Prepare a journal entry for the purchase of office supplies on September 30 for $2,500, paying $800 cash and the remainder on account.

To determine

Journal:

Journal is the book of original entry. Journal consists of the day today financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.

Rules of debit and credit:

“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.

Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.

To prepare: Journal entry for the purchase of asset (office supplies).

Explanation

  • Supply is an asset and increased, hence debit supplies for $2,500.
  • Accounts payable is a liability and increased, hence credit accounts payable for $1,700.
  • Cash is an asset and decreased, hence credit cash for $800.

For the above journal entry the accounting equation is affected as below:

{Assets(+ Supplies $2,500

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