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

When a business Bought Or Purchased Office Equipment For Cash Or For Bank i.e., through check / cheque, then assets accounts are affected. One account is Office Equipment which is a Fixed Asset while other account is a Cash or Bank which is a Current Asset.

The journal entry to record is shown below:

                                                                       Office Equipment a/c  XXX

 

                                                                                                                  Cash a/c / Bank a/c  XXX

 

                                                                              (Office Equipment Bought For Cash / Bank)

As office equipment is increasing as it is coming into the business, so we debit it and cash or bank is decreasing as cash is going out of the business or money is withdrawn from bank account, so we credit cash account or bank account whichever is the case.

For example, Mr. A is a sole owner, bought office equipment of Rs. 50000 from Mr. B for cash. What is the journal entry and the effect of purchasing office equipment on the accounting equation?

                                                                                  Office Equipment a/c  50000

 

                                                                                                                            Cash a/c 50000

 

                                                                               (Purchased Office Equipment For Cash)

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

                                         Assets                        =      Liabilities    +     Owner’s Equity

                       -Cash    +Office Equipment        =            0             +                0

                      -50000   +50000                           =            0             +                0

 

Office equipment is added to assets side of the accounting equation as it is coming into the business while cash is deducted from assets side or left side of the accounting equation as it is going out of the business. No change will be made on the right side of the accounting equation, so the accounting equation remains in balance.