What Is Used To Record All Transactions Involving Cash Payments
Cash Payments Are Recorded In Which Journal / Purchase Of Merchandise For Cash Would Be Recorded In Which Journal
Cash payments journal, which is a Special Journal, include expenses paid for cash, cash paid to suppliers, cash purchases or merchandise purchases or inventory purchases for cash.
Example: Mr. A is a sole owner in his business. From the Special Journal of the business, we get this transaction: 2nd July, 2021: Merchandise Purchased For Cash Rs. 10000.
This transaction involves cash payment i.e., the business purchased merchandise / goods from supplier / vendor for cash.
The journal entry to record for merchandise / goods purchased for cash is shown below:
Purchases a/c 10000
Cash a/c 10000
(Merchandise / Goods Purchased For Cash)
The Effect Of Purchased Merchandise For Cash On The Accounting Equation / Effects Of Cash Payments On Accounting Equation
Assets = Liabilities + Owner’s Equity
-Cash = 0 + (-Purchases)
-10000 = 0 + (-10000)
Due to the profitable or operating activities of the owner of the business, owner’s equity is affected. As the purchases is increased by Rs. 10000 and also as it has normal debit balance, so it is deducted from owner’ equity account on the right side of the accounting equation.
As Cash is decreased by Rs. 10000 i.e., it has a negative balance, so it is also deducted from assets on the left side of the accounting equation and hence accounting equation remain in balance.
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