Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 37 - No. 41)
If a business purchased equipment for $5,000 on credit, which accounts would be affected?
Debit Equipment, Credit Cash
Debit Cash, Credit Equipment
Debit Equipment, Credit Accounts Payable
Debit Accounts Payable, Credit Equipment
Explanation
The purchase of equipment increases the asset account 'Equipment' and since it's purchased on credit, it increases the liability account 'Accounts Payable'.
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