The Journal Entry for Purchasing Equipment and Furniture

What is the correct journal entry to record the purchase of equipment for $660 and furniture for $350 in a single transaction? The correct journal entry to record the purchase of equipment for $660 and furniture for $350 in a single transaction would include a debit to Cash for $1,010, a credit to Equipment for $660, and a credit to Furniture for $350. This is because a debit to Cash increases Cash, and credits to Equipment and Furniture increase Equipment and Furniture, respectively. So, when a company purchases equipment and furniture, Cash is debited and Equipment and Furniture are credited accordingly. Therefore, the correct journal entry would be:
  • Debit to Cash: $1,010
  • Credit to Equipment: $660
  • Credit to Furniture: $350

Explanation

When a company makes a purchase, the journal entry needs to reflect the increase and decrease in relevant accounts. In this case, the company is buying equipment and furniture, which are assets. When assets are purchased, they increase, and the accounts associated with these assets should be credited.

In the transaction mentioned, the company is paying for the equipment and furniture with Cash, which is also an asset. When Cash is paid out, it decreases, so Cash needs to be debited in the journal entry. On the other hand, Equipment and Furniture are increasing due to the purchase, so they need to be credited.

By following the double-entry accounting system, we ensure that the journal entry is accurate and reflects the impact of the transaction on the company's financial position. Debiting Cash and crediting Equipment and Furniture in this transaction is the correct way to accurately record the purchase of equipment and furniture in the company's books.

← Quick loans how much will you pay for a 400 loan Understanding 070 account withdrawal limits →

More Posts: