A business buys a piece of equipment for 4,000. The equipment is damaged during shipping, and the seller gives the business a partial credit of 750.
How do you show the Fixed Asset Credit For Damages?
The fixed asset partial credit for damages transaction is shown in the accounting records with the following bookkeeping entries:
| Account | Debit | Credit |
|---|---|---|
| Equipment | 750 | |
| Accounts payable | 750 | |
| Total | 750 | 750 |
Fixed Asset Credit For Damages Bookkeeping Entries Explained
Debit
The debit of 750 represents the reduction in the liability to the seller.
Credit
The credit shows the reduction in the cost of the equipment from the original 4,000 to 3,250.
The Accounting Equation
The Accounting Equation, Assets = Liabilities + Equity means that the total assets of the business are always equal to the total liabilities plus the equity of the business This is true at any time and applies to each transaction. For this transaction the Accounting equation is shown in the following table.
| Assets | = | Liabilities | + | Owners Equity |
|---|---|---|---|---|
| Equipment | = | Accounts payable | + | None |
| -750 | = | -750 | + | 0 |
In this case one asset (fixed assets) decreases representing the reduction in the cost of the equipment. This is balanced on the other side of the accounting equation by a decease in a liability (accounts payable) as the amount owed to the supplier is now reduced by the partial credit.
Popular Double Entry Bookkeeping Examples
This fixed asset credit for damages journal entry is one of many examples used in double entry bookkeeping, discover another at the links below.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.