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ACCA Applied Knowledge · Financial Accounting · Double-entry bookkeeping principles including the maintenance of accounting records

A business buys a machine for $12,000, paying $4,000 by cheque and receiving credit for the remainder from the supplier. Which entry correctly records this?

Debit Machinery $12,000, credit Bank $4,000 and credit Payables $8,000. The asset is recorded at full cost, the cheque reduces the bank balance, and the unpaid remainder creates a liability to the supplier, so total debits equal total credits.

  1. ADr Machinery $12,000; Cr Bank $4,000; Cr Payables $8,000Correct
  2. BDr Machinery $12,000; Cr Bank $8,000; Cr Payables $4,000
  3. CDr Machinery $4,000; Dr Purchases $8,000; Cr Payables $12,000
  4. DDr Machinery $12,000; Dr Bank $4,000; Cr Payables $16,000

Explanation

The asset is recorded at full cost of 12,000 as a debit. Bank is credited with the 4,000 paid and the unpaid 8,000 is credited to payables. Debits 12,000 equal credits 12,000. Option B swaps the amounts, and C wrongly uses purchases for a non-current asset.

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