Question

Buy coffee maker with $500 Cash (check or cash) - Which of the following is a correct entry?

Credit $500 - Cash in Bank
Debit $500 - Cash in bank
Credit $500 - Equipment
Credit $500 - Accounts Payable
Debit $500 - Account Payable

Answer 1

The correct accounting entry for purchasing a coffee maker with $500 cash is to debit Equipment for $500 and credit Cash in Bank for the same amount, reflecting the asset exchange without involving Accounts Payable.

Step-by-step explanation:

When you buy a coffee maker for $500 cash (whether by check or cash), the accounting entry will reflect a decrease in the cash account and an increase in the equipment account, since you are exchanging one asset (cash) for another (equipment). The correct journal entry would be:

• Debit $500 - Equipment (to record the purchase of an asset, the coffee maker)
• Credit $500 - Cash in Bank (to record the reduction in cash due to payment)

The correct answer from the options provided is 'Debit $500 - Equipment; Credit $500 - Cash in Bank'. There is no need to touch Accounts Payable in this transaction because the purchase was made with cash, not on credit.