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CS Executive · Corporate Accounting and Financial Management · Introduction to Accounting

Mehta Traders purchased office furniture on credit from Shah Furnishers for ₹40,000. Which journal entry correctly records this transaction in Mehta Traders' books?

Furniture A/c is debited and Shah Furnishers A/c is credited for ₹40,000. Furniture is an asset received, so it is debited, while the supplier becomes a creditor, so it is credited. The Purchases account is reserved for goods meant for resale.

  1. AFurniture A/c Dr. 40,000 to Shah Furnishers A/c 40,000Correct
  2. BPurchases A/c Dr. 40,000 to Shah Furnishers A/c 40,000
  3. CShah Furnishers A/c Dr. 40,000 to Furniture A/c 40,000
  4. DFurniture A/c Dr. 40,000 to Cash A/c 40,000

Explanation

Furniture is a fixed asset acquired, so the Furniture account is debited. The supplier is a creditor, so Shah Furnishers is credited. Debiting Purchases is wrong because purchases is used only for goods meant for resale.

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