Skip to content

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

Tamsin Ltd paid $4,000 to repaint its existing factory building as part of routine upkeep. Which journal entry correctly records this payment?

The repainting is routine upkeep, so it is revenue expenditure. Tamsin Ltd should debit a repairs and maintenance expense account and credit bank with $4,000. Capitalising it in property, plant and equipment would overstate assets and profit.

  1. ADebit Property, plant and equipment $4,000; Credit Bank $4,000
  2. BDebit Repairs and maintenance expense $4,000; Credit Bank $4,000Correct
  3. CDebit Bank $4,000; Credit Repairs and maintenance expense $4,000
  4. DDebit Repairs and maintenance expense $4,000; Credit Property, plant and equipment $4,000

Explanation

Repainting maintains the existing earning capacity of the building and is revenue expenditure. It is debited to an expense account and the bank is credited. Debiting property, plant and equipment wrongly capitalises a routine cost.

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