What is the journal entry for purchase of machinery?

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A customer can purchase on two grounds: cash or credit. In the case of a cash purchase, the payment is made immediately by the customer however, in the case of a credit purchase, the payment is expected to be made in the future as per the agreement.

Journal entry for purchase of machinery on credit basis

Machinery a/c Debit Debit  the increase in asset
To Creditor/suppliers a/c Credit Credit the increase in liability

(being machinery purchased on credit)

 

Journal entry for purchase of machinery for cash

Machinery a/c Debit Debit  the increase in asset
To Cash Credit Credit the decrease in asset

(being machinery purchased for cash)

 

Example

1. Mr K purchased machinery from ABC Ltd. amounting to 20,000 on credit. The journal entry in the books of Mr K is as follows:

Machinery a/c Debit 20,000
To ABC Ltd. a/c Credit 20,000

(being machinery purchased on credit)

 

2. Mr A purchased machinery from XYZ Ltd. amounting to 20,000 on a cash basis. The journal entry in the books of Mr A is as follows:

Machinery a/c Debit 40,000
To Cash Credit 40,000

(being machinery purchased for cash)

 



 

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