Skip to content

ACCA Applied Knowledge · Financial Accounting · General ledger accounts and journal entries

A business buys office furniture for $4,000 and pays by bank transfer immediately. Which entry records this transaction correctly?

Debit Office furniture and credit Bank for $4,000. The furniture is an asset that increases, so it is debited, while the bank balance falls because payment was made immediately, so Bank is credited. Purchases is reserved for goods bought for resale.

  1. ADebit Office furniture $4,000; credit Bank $4,000Correct
  2. BDebit Bank $4,000; credit Office furniture $4,000
  3. CDebit Office furniture $4,000; credit Payables $4,000
  4. DDebit Purchases $4,000; credit Bank $4,000

Explanation

Furniture is a non-current asset, so an increase is a debit. Paying from the bank reduces an asset, which is a credit to Bank. Option B reverses both sides. Option C would apply only if bought on credit. Option D wrongly uses Purchases, which is for goods for resale.

Did you get it right without looking?

One question tells you little. A timed set on General ledger accounts and journal entries shows your real accuracy, how long you take and where you lose marks.

Practise General ledger accounts and journal entriesFree diagnostic mock

More General ledger accounts and journal entries questions