The Purchase Of An Asset For Cash

The purchase of an Asset for Cash or on account or credit is made only for using the asset in the business and not for resale purposes. When the company or the corporation purchased an asset for cash, then it results in the debit of asset account and credit to cash account.

You Can Also Read Out, “The Purchase Of An Asset On Account”

For example, if the company purchased furniture Rs. 50000 for cash from Mr. A & Co. to be used in the business, then it is a purchase of furniture for cash and following Journal Entry can be recorded as follows:

                                         Furniture a/c  50000

                                                                Cash a/c  50000

                                  (Purchased Furniture Rs. 50000 For Cash From Mr. A & Co.)

When a Fixed Asset is purchased, then there is a need to charge Depreciation on it in order to estimate its cost reliable within the estimated useful life time frame. While for Intangible Assets, there is need of Amortization of the cost of the assets based on the estimated useful life for which such asset is useful for the business.