Fixed Asset Purchase with Cash

Suppose for example you decide on a fixed asset purchase of new furniture for the business for 2,000 using cash.

 

How do you show the Fixed Asset Purchase?

The purchase of fixed assets transaction is shown in the accounting records with the following bookkeeping entries:

Fixed Asset Purchases Journal Entry
Account Debit Credit
Fixed Assets 2,000
Cash 2,000
Total 2,000 2,000

Fixed Asset Purchase Bookkeeping Entries Explained

Debit – What came into the business
New furniture came into the business following the fixed asset purchase.

Credit – What went out of the business
Cash went out of the business to pay for the purchase.

The Accounting Equation

The Accounting Equation, Assets = Liabilities + Capital means that the total assets of the business are always equal to the total liabilities 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.

Fixed Asset Purchases Accounting Equation
Assets = Liabilities + Capital
Fixed Assets + Cash = None + None
2,000 – 2,000 = 0 + 0

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Last modified April 2nd, 2019 by Michael Brown

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.

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