Journalizing a Business Transaction – Example 3
On Jan 10th, ‘X’ business bought a truck from Y-Auto business for $ 10,000 (Invoice No. 500).
Step 1: Analysis:
The accounts affected in the transaction are:
- Accounts Payable: Y-Auto Account
- Delivery account is an Asset
- Accounts Payable: Y-Auto Account is a Liability account
- Delivery Equipment increases by $10,000
- Accounts Payable increases by $10,000
Step 2: Debit – Credit Rule:
- Increase in the Asset account is recorded as debit. Debit Delivery Equipment for $10,000.
- Increase in the Accounts Payable is recorded as credit. Credit Accounts Payable: Y-Auto Account for $10,000.
Step 3: Prepare a Delivery Equipment:
Step 4: Pass a Journal Entry:
