CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Cycle
Mehta & Co. purchased office furniture for Rs 40,000 on credit from Kapoor Furnishers. Which journal entry correctly records this transaction?
The entry is Furniture A/c debit Rs 40,000 and Kapoor Furnishers A/c credit Rs 40,000. Furniture is an asset coming in, so it is debited, and the supplier is the giver on credit. It is not Purchases because it is not goods for resale.
- AFurniture A/c Dr 40,000 to Kapoor Furnishers A/c 40,000Correct
- BPurchases A/c Dr 40,000 to Kapoor Furnishers A/c 40,000
- CKapoor Furnishers A/c Dr 40,000 to Furniture A/c 40,000
- DFurniture A/c Dr 40,000 to Cash A/c 40,000
Explanation
Furniture is a real asset coming in, so it is debited. Kapoor Furnishers is the giver on credit, so it is credited. Debiting Purchases is wrong because furniture is a fixed asset not meant for resale, and crediting Cash is wrong because the purchase is on credit.
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