Bought office furniture journal entry is Debit the Office Furniture because the increases the fixed asset account, reflecting the addition of office furniture. Credit to Cash/Bank This decreases the cash or bank account, reflecting the outflow of funds. When a business purchases office furniture, it needs to record the transaction accurately in its accounting records. Office furniture is considered a fixed asset, and its purchase increases the asset base of the business.
Key Concepts
- Fixed Asset: Long-term tangible assets such as office furniture.
- Cash/Bank: The account used to pay for the furniture.
- Accounts Payable: A liability account used if the furniture is bought on credit.
Journal Entry for Buying Office Furniture
Example Scenario: Purchase with Cash/Bank
Assume a business buys office furniture worth ₹100,000 on 01-07-2023 and pays in cash.
Step-by-Step Journal Entry
- Record the Purchase of Office Furniture
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 01-07-2023 | Office Furniture | 100,000 | Purchase of office furniture | |
| 01-07-2023 | To Cash/Bank | 100,000 | Payment for office furniture |
Explanation
- Debit to Office Furniture: This increases the fixed asset account, reflecting the addition of office furniture.
- Credit to Cash/Bank: This decreases the cash or bank account, reflecting the outflow of funds.
Example Scenario: Purchase on Credit
Assume a business buys office furniture worth ₹100,000 on 01-07-2023 and agrees to pay the supplier in 30 days.
Step-by-Step Journal Entry
- Record the Purchase of Office Furniture on Credit
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 01-07-2023 | Office Furniture | 100,000 | Purchase of office furniture | |
| 01-07-2023 | To Accounts Payable | 100,000 | Furniture purchased on credit |
- Record the Payment to the Supplier (When Paid)
Assume the payment is made on 31-07-2023.
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 31-07-2023 | Accounts Payable | 100,000 | Payment to furniture supplier | |
| 31-07-2023 | To Cash/Bank | 100,000 | Payment for office furniture |
Explanation
- Debit to Office Furniture: This increases the fixed asset account, reflecting the addition of office furniture.
- Credit to Accounts Payable: This increases the liability account, reflecting the obligation to pay the supplier.
- Debit to Accounts Payable (when paid): This decreases the liability account, reflecting the settlement of the obligation.
- Credit to Cash/Bank (when paid): This decreases the cash or bank account, reflecting the outflow of funds.
Conclusion
Accurately recording the purchase of office furniture ensures that the business’s financial statements reflect the acquisition of assets and any associated liabilities. Properly managing these transactions helps maintain accurate and reliable financial records.