A Company Purchased A Desk For $800, Paying 10% In Cash With The Remaining Balance Due In 60 Days.

Solution To Question

Here:

Cash = 10% X 800 = $80

Accounts Payable = 800 – 80 = $720

The combined journal entry to record this Transaction is shown below:

                                                   Desk a/c  $800

                                                                   Cash a/c  $80

                                                                   Accounts Payable a/c  $720

                                   (Desk Purchased Partially For Cash And On Account)

Desk is a Fixed Asset / Non Current Asset and it is increasing, so we debit it. Cash is a Current Asset and it is increasing as it is going out of the business i.e., there is cash outflow, so we credit it. The major part of purchase amount of desk is on credit or account, so we create a liability account i.e., Accounts Payable, which is increasing, so we credit it according to the Rules

of Debit And Credit.