Pepper Consulting purchased computers on credit from PYO Suppliers and recorded the transaction in the journal. Which entry correctly reflects this purchase?

Pepper Consulting purchased computers on credit from PYO Suppliers and recorded the transaction in the journal. Which entry correctly reflects this purchase?

• A. Debit: Computers; Credit: PYO Credit Payable
• B. Debit: PYO Credit Payable; Credit: Computers
• C. Debit: Sales; Credit: Computers
• D. Debit: Computers; Credit: Sales

Answer: (A)

Recording a purchase on credit means you acquire an asset and incur a liability. Since Pepper Consulting gains computers, the Computers asset is increased, which is shown with a debit. At the same time, the obligation to PYO Suppliers is recognized as a liability, and that increases with a credit to PYO Credit Payable. This pairing correctly reflects both sides of the transaction: an asset increase and a corresponding liability. Entries that debit the liability or credit the asset would misstate the nature of the transaction, and using Sales would reflect revenue rather than a purchase.

Recording a purchase on credit means you acquire an asset and incur a liability. Since Pepper Consulting gains computers, the Computers asset is increased, which is shown with a debit. At the same time, the obligation to PYO Suppliers is recognized as a liability, and that increases with a credit to PYO Credit Payable. This pairing correctly reflects both sides of the transaction: an asset increase and a corresponding liability. Entries that debit the liability or credit the asset would misstate the nature of the transaction, and using Sales would reflect revenue rather than a purchase.