Which of the following would be recorded as an asset when purchased with cash?

Which of the following would be recorded as an asset when purchased with cash?

• A. A vehicle
• B. Taxes payable
• C. Accounts payable
• D. Revenue

Answer: (A)

Asset recognition and how a cash purchase changes the records: when you acquire something expected to provide future benefits, you record it as an asset. Buying a vehicle with cash adds a new asset—the vehicle. In the books, you would debit the Vehicle asset to show the increase, and you would credit Cash to reflect the cash payment. The other items are not assets: taxes payable and accounts payable are liabilities, representing what the business owes, while revenue is income that increases equity but is not an asset. So the vehicle is the asset recorded in this cash purchase.

Asset recognition and how a cash purchase changes the records: when you acquire something expected to provide future benefits, you record it as an asset. Buying a vehicle with cash adds a new asset—the vehicle. In the books, you would debit the Vehicle asset to show the increase, and you would credit Cash to reflect the cash payment. The other items are not assets: taxes payable and accounts payable are liabilities, representing what the business owes, while revenue is income that increases equity but is not an asset. So the vehicle is the asset recorded in this cash purchase.