Fixed Assets Purchase Incurring a Liability

You decide on a fixed assets purchase of new plant for the business of 5,000 and are able to obtain credit from the supplier by agreeing to pay in 30 days time.

How do you show the Fixed Assets Purchase?

The purchase of fixed assets transaction is shown in the accounting records with the following bookkeeping entries:

Fixed Assets Purchase Journal Entry
Account Debit Credit
Plant, and equipment 5,000
Accounts payable 5,000
Total 5,000 5,000

Fixed Assets Purchase Bookkeeping Entries Explained

Debit – What came into the business
New plant came into the business following the fixed assets purchase.

Credit – What went out of the business
The business now has a liability of money owed to the supplier which is due in 30 days time.

The Accounting Equation

The Accounting Equation, Assets = Liabilities + Equity means that the total assets of the business are always equal to the total liabilities plus the equity 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.

Fixed Assets Purchase Accounting Equation
Assets = Liabilities + Owners Equity
Plant and equipment = Accounts Payable + None
5,000 = 5,000 + 0

In this case an asset (Plant and equipment) increases representing the purchases cost of the new plant. The other side of the accounting equation is a increase in a liability to pay the supplier for the asset (accounts payable) in 30 days time.

Popular mdct.ru Examples

This fixed assets purchase incurring a liability journal entry is one of many examples used in mdct.ru, discover another at the links below.

Fixed Assets Purchase Incurring a Liability November 6th, 2016Team

You May Also Like


Related pages


what is a capital expense exampleswhat is a cash floatexample of multiple step income statementaccounting suspense account examplesweighted contribution margincalculate discount rate in excelmeaning of prepaid expensespetty cash book templateaccounts receivable and unearned revenuewhat is recourse factoringpresent value of an annuity calculatort accounts debits and creditsfuture value annuity chartwhat is a trade discount in accountingmanufacturing overheadsgross redemption yield calculationexample of a petty cash bookaccounting for zero coupon bondsfinance lease vs operating lease accountingprofitable indexwhat is the purpose of closing entries in accountingadvantages of cash bookjournal entry for purchase of treasury stockfuture value formula in exceldouble entry accounting templateactivity ratios formulasmanufacturing overhead variancewarranty journal entriesmargin vs markup chartdays sales receivables formulaweighted average inventory calculationapplied manufacturing overhead formulacredit sales accounting entrydouble entry bookkeeping exercisesgross profit formula in excela common size income statementhow to calculate overhead recovery rateis unearned revenue an asset or liabilitycarriage inwards definitionbook keeping spreadsheetleasing calculator formulajournal entry for convertible bondschart of accounts for construction company templateequity multiplier ratio formulaaccumulated amortization journal entryprintable ledgers bookkeepingjournal entries for accrualsexamples of accrued incomecurrent liabilities ratio formulaonline tvm calculatoraccrual accounting entrydividend growth model exceloperating lease treatmentinventory turnover calculation examplemargin vs markup calculationcalculating degree of operating leverageinterest receivable journal entrygl reconciliation templatefob prepaidincome summary journal entrycalculate simple paybackcalculating trade discountredeemable preferred stockprepare a bank reconciliation statement for the monthwhat is underapplied overheadcontribution margin income statement formatmark up formulaeffective interest amortization calculatoradjusting entries for notes payabledebt and equity ratiosexamples of direct laborformula for contribution margin per unitloan balance calculator excelpurchase method of accounting examplehow to calculate work in process inventory endingcash ledger book formattransposed numbers divisible by 9