The general journal entry to record the purchase of an asset on account would include
A) a debit to Accounts Receivable and a credit to Fees Earned.
B) a debit to Equipment and a credit to Accounts Payable.
C) a debit to Accounts Payable and a credit to Equipment.
D) a debit to Supplies and a credit to Cash.

Question

Quizplus · Accepted Answer

When an asset is purchased on account (meaning, on credit or with the promise to pay at a later date), the accounts involved are Equipment (or whichever asset is being purchased; it could be land, buildings, etc.) and Accounts Payable (which represents the amount owed to the supplier or vendor). Debiting Equipment increases the asset balance, while crediting Accounts Payable increases the liability balance. Therefore, the correct entry would be a debit to Equipment and a credit to Accounts Payable.

The General Journal Entry to Record the Purchase of an Asset