FA – May 2018 – L1 – SA – Q11 – Double-Entry Accounting Principles

Determines the correct double-entry recording of a computer purchase transaction.

Question

Computer Company Limited recently bought ten computers for its use, which of the following is the correct method of recording this transaction?
A. Debit computers account and credit cash account
B. Debit purchases account and credit cash account
C. Debit cash account and credit purchases account
D. Debit cash account and credit computers account
E. Debit computers account and credit purchases account

Answer

Explanation:
Option A is correct because when purchasing computers for business use, the computers are considered assets, and the correct double-entry method involves debiting the computers (asset) account and crediting the cash account (the payment method used). This reflects the increase in assets and decrease in cash.

Tags: Asset Recording, Double Entry, Purchases
Level: Level 1

Topic: Double-Entry Accounting Principles
Series: MAY 2018

Uploader: Theophilus