ACCA Applied Knowledge · Financial Accounting · Double-entry bookkeeping principles including the maintenance of accounting records
Zeta Co buys office furniture for $4,000 on credit from Brant Ltd. Which journal entry records this transaction?
Debit Furniture and credit Payables for $4,000. The furniture is a non-current asset, which is increased by a debit, and because it was bought on credit the amount owed to the supplier is a liability, which increases with a credit.
- ADebit Furniture $4,000; Credit Payables $4,000Correct
- BDebit Payables $4,000; Credit Furniture $4,000
- CDebit Purchases $4,000; Credit Payables $4,000
- DDebit Furniture $4,000; Credit Bank $4,000
Explanation
Furniture is a non-current asset, so it is debited. The supplier is owed money, so the payables account is credited. Debiting purchases is wrong because purchases are for goods for resale, and crediting bank is wrong because no cash was paid.
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