How To Enter Accounting Journal Entries For Assets

Previously, we already studied about, “Journal Entries For Liabilities” but, here we will study about Assets Accounting Journal Entries in the Book or Journal of the business of Company.

Assets are resources of the business and these provide probable future economic benefits to the business. Asset are of two types:

1. Current Assets having one or less than one year life. Examples are Accounts Receivable, Cash, Inventory, Prepaid Rent, Accrued Revenue, Short-Term Investment, etc.

Fixed Assets / Long Term Assets / Non Current Assets having life more than one year. These include Land & Buildings, Plant & Machinery, Furniture & Fixtures, Office Equipment like Mobile Phones Computers, Laptops, Chairs,etc, Long-Term Investments, etc.

Before giving the example, you must understand the General Rule For Assets that is When Assets increases, we debit it and these decrease we credit it. However, the Normal or Favourable or Positive Balance for Assets is Debit while Negative or Unfavourable Balance is Credit.

For More Information About Rules of Debit And Credit And Their Differentiation, You Can Read Out This Helpful Article, “What is The Difference Between Debit And Credit”

So, now, let us consider an example in order to understand this topic easily. Let Suppose, The ABC Company Sold Goods worth Rs. 100000 To Mr. X, the customer of Company, then following Accounting Journal Entry is passed in the Book or Journal of Company:

                                                            Mr. X   100000

                                                                     Sales a/c   100000

(Sold Goods Worth Rs. 100000 To Mr. X On Credit Basis)

Here, Mr. X as a Account Receivable / Debtor is a Current Asset and it is increasing, so we debit it while Sales is also increasing, so we credit it.

Now, let us suppose, that the customer, Mr. X makes the payment for goods sold to him / her by ABC Company, then following Accounting Journal Entry is recorded in the book of Company:

                                                            Cash a/c   100000

                                                                        Mr. X   100000

(Cash Received From Mr. X For Goods Sold On Credit Basis)

The above Journal Entry shows that the Accounts Receivable / Debtor is decreasing by Rs. 100000 as the customer, Mr. X is making the payment for goods sold on Credit Basis. The Cash is increasing by Rs. 100000 as we are receiving Cash payment from our Customer, Mr. X, who makes the payment on time.

Consider an other example, when cash Rs. 500000 is invested by sole owner (sole proprietor) into the business to start the business:

                                                       Cash a/c   500000

                                                                 Capital a/c   500000

(Cash Invested into Business For Rs. 500000)

Here Cash is a Current Asset which is increasing by Rs. 500000 as it is coming into the business, so we debit it while Capital is also increasing by Rs. 500000 as a Owner’s Equity or right of owner of the business, so we credit it.

So, in this way, you can easily enter Accounting Journal Entries For Assets in the business of Company or Sole Proprietorship or any kind / type of business.