Which journal entry could represent a cash purchase of equipment?

Which journal entry could represent a cash purchase of equipment?

• A. Purchasing $70 worth of equipment with cash.
• B. Selling $70 worth of equipment for cash.
• C. Purchasing $70 worth of equipment on credit.
• D. Selling $70 worth of equipment on credit.

Answer: (A)

A cash purchase of equipment involves exchanging cash for a new asset. In double-entry accounting, you increase the Equipment asset (a debit) and decrease the Cash asset (a credit) for the purchase amount. For this example, the proper entry is to debit Equipment for 70 and credit Cash for 70. This shows cash leaving the business and equipment being acquired, keeping the overall assets balanced. The other scenarios don’t reflect paying cash for equipment: selling equipment either brings cash in and reduces equipment, or records a receivable if sold on credit; purchasing on credit increases Equipment but increases a liability (Accounts Payable) rather than decreasing cash; selling on credit involves receivables rather than cash.

A cash purchase of equipment involves exchanging cash for a new asset. In double-entry accounting, you increase the Equipment asset (a debit) and decrease the Cash asset (a credit) for the purchase amount. For this example, the proper entry is to debit Equipment for 70 and credit Cash for 70. This shows cash leaving the business and equipment being acquired, keeping the overall assets balanced.

The other scenarios don’t reflect paying cash for equipment: selling equipment either brings cash in and reduces equipment, or records a receivable if sold on credit; purchasing on credit increases Equipment but increases a liability (Accounts Payable) rather than decreasing cash; selling on credit involves receivables rather than cash.