A Business Buys Office Equipment On Account. What Effect Will This Transaction Have On The Accounts?

When a business Bought Or Purchased Office Equipment On Account Or On Credit, then office equipment account is debited as it is coming into the business and accounts payable / creditor account is credited as the business is liable to pay the amount of office equipment to suppliers or vendors on later date as agreed upon the Management of the business and the supplier or vendor or creditor.

Example: Mr. A, as a Sole Proprietor, bought office equipment of Rs. 30000 from Mr. B On Credit / Account. What is the journal entry for purchasing of office equipment and the effect of this transaction on the accounting equation?

The journal entry to record for buying or purchasing office equipment on account is shown below:

                                                Office Equipment a/c  30000

 

                                                                                     Accounts Payable a/c / Sundry Creditor a/c  30000

 

                                                               (Purchased Office Equipment On Account)

The Effect Of Buying / Purchasing Office Equipment On Account / Credit On The Accounting Equation

                                         Assets                   =    Liabilities                      +    Owner’s Equity

                               +Office Equipment         =  +Accounts Payable       +              0

                                        +30000                   =   +30000                           +              0

 

The office equipment as a fixed asset is increased by Rs. 30000 as it is coming into the business, so it is added to the assets on the left side of the accounting equation. Accounts payable as a current liability is also increasing as the business is liable to pay to the supplier for the amount office equipment purchased on account. So, it is added to the liabilities on the right side of the accounting equation. After the recording of this transaction, the accounting equation remains in balance.