Buy Equipment with Down Payment in Cash

A business buys networking equipment to the value of 12,000 and makes a down payment in cash of 3,000 and funds the balance using credit from the supplier.

The journal entry to record the purchase of the networking equipment is as follows:

Buy Equipment with Down Payment in Cash Journal Entry

The accounting records will show the following bookkeeping transaction entries to buy equipment with a down payment in cash and the balance on supplier credit.

Buy Equipment with Down Payment in Cash Journal Entry
Account Debit Credit
Equipment 12,000
Cash 3,000
Accounts payable 9,000
Total 12,000 12,000

Buy Equipment with Down Payment in Cash Explained

Networking equipment has been purchased by the business, this is a long term asset of the business and is recorded in the networking equipment account on the balance sheet.

The business has paid out cash of 3,000 as a down payment for the equipment, and the asset of cash is reduced by the credit. In addition, the business owes the supplier for the balance of the amount (12,000 – 3,000 = 9,000), and this is recorded as a credit to accounts payable, a liability account.

Accounting Equation Buy Equipment – Down Payment in Cash

The accounting equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities of the business This is true at any time and applies to each transaction. For this transaction the accounting equation is shown in the following table.

Buy Equipment with Down Payment in Cash Accounting Equation
Assets = Liabilities + Owners Equity
Equipment + Cash = Accounts payable + None
12,000 – 3,000 = 9,000 + 0

In this case one long term asset increases as the business now owns the networking equipment, and another asset (cash) decreases as money is spent to make the down payment. On the other side of the equation, a liability (accounts payable) increases by the net amount (£9,000) to show the amount owed to the equipment supplier in accordance with their credit terms

Popular Examples

Another example for you to discover.

Buy Equipment with Down Payment in Cash November 6th, 2016Team

You May Also Like

Related pages

bookkeeping formataccruals and prepayments double entrypetty cash report templateaccumulated depreciation calculatorthe calculation of depreciation using the declining balance methodirrevocable lcpercentage of completion method of accountingperpetuity cash flowprepaid expenses accounting definitiongross profit excel formulasale of fixed assets journal entryaccounting ratio calculatorjournal entry for uncollectible accountsgross margin calcmonthly payment function excelhow to find variable expensesamortization table exampleadvance payment journal entrypv annuity formulaincome statement horizontal analysisaging of receivables methodpetty cash claim formdebt to profit ratiofifo calculationfuture value and present value formulasannuity payment calculatoraccrued expenses in income statementbank reconciliation notes pdfdefine double entry accounting systembond amortization effective interest methodwages payable balance sheetmark up vs marginhow to do vertical analysis of income statementgeneral ledger paperbank reconciliation proformacost ledger control accountsmall business accounting excel templatejournal entry for accrued expenseshow to calculate operating leverageaccounts receivable equationjournal entry for bills receivablecash flow projections template exceldouble entry depreciationhow to calculate depreciation on fixed assetscapital gearing formulabank reconciliation journal entrieswhat is cogs in accountingadvances from customers journal entryperpetual method of inventorywhat does sundry expenses meanhow do you calculate stockholders equityoperating leaveragefifo calculator onlinedouble entry depreciationexcel ledger templatehorizontal and vertical analysis of balance sheetwhen using a perpetual inventory systemhow to estimate salvage valueaccounting principles quizdecreasing perpetuityjournal entry for cash dividenddaily timesheet template freeaccounts ledger templatepost closing trial balance should only containsingle entry ledgermeaning of trade creditorslump sum formulanet60 paymentvertical analysis of income statement interpretationhow to calculate average accounts receivableentry for prepaid expenseamortization spreadsheet templatemortgage constant definition