From the course: Advanced Bookkeeping Techniques

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Journal entries: Buying assets and repaying loans

Journal entries: Buying assets and repaying loans

From the course: Advanced Bookkeeping Techniques

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Journal entries: Buying assets and repaying loans

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- Let's now use journal entries to record the purchase of assets and the repayment of loans. Veda Landscape Solutions used $650,000 of its cash to purchase equipment. First, does this transaction involve any cash? Yes, cash decreases by $650,000. We know that asset decreases are recorded with credits. So here is the start of our journal entry. Second, are there any other assets involved? The answer, yes, equipment. The amount of equipment goes up. Asset increases are recorded with debits. Here's the completed journal entry. Well, that was easy. Notice that debits equal credits. The interpretation of this journal entry is that the business used $650,000 in cash to purchase equipment. Let's try another asset purchase. Veda purchased inventory costing $90,000 for $10,000 in cash and the remaining $80,000 on account. First, does this transaction involve any cash? Yes, cash decreases by $10,000. We know that asset…

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