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Accounting (Text Only)
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.
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).
- 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:
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