Which of the following transactions, journal proper will not use Option 1. Purchase fixed assets for cash 2. Purchase fixed assets on credit?

Question

Answer

Purchase of Fixed Assets for Cash

When a company purchases fixed assets for cash, it involves exchanging cash for a long-term asset that will be used in the business operations. This transaction is recorded in the journal proper using the following steps:

Identify the accounts involved in the transaction:
- Cash account: Represents the cash outflow from the company.
- Fixed assets account: Represents the acquisition of a long-term asset.

Determine the amounts involved in the transaction:
- Record the cost of the fixed asset in the fixed assets account.
- Record the cash payment made in the cash account.

Record the transaction in the journal proper:
- Debit the fixed assets account for the cost of the asset.
- Credit the cash account for the amount paid.

By following these steps, the journal proper records the purchase of fixed assets for cash in a clear and organized manner.

Purchase of Fixed Assets on Credit

When a company purchases fixed assets on credit, it means that the payment for the asset will be made at a later date. This transaction is recorded in the journal proper using the following steps:

Identify the accounts involved in the transaction:
- Accounts payable account: Represents the liability created by the purchase on credit.
- Fixed assets account: Represents the acquisition of a long-term asset.

Determine the amounts involved in the transaction:
- Record the cost of the fixed asset in the fixed assets account.
- No cash payment is made at the time of the purchase.

Record the transaction in the journal proper:
- Debit the fixed assets account for the cost of the asset.
- Credit the accounts payable account for the amount owed.

By following these steps, the journal proper records the purchase of fixed assets on credit, reflecting the liability created and the cost of the asset acquired.

Explanation

The journal proper is a special journal used to record transactions that do not fit into the regular journals like the sales journal or purchases journal. It is used to record significant or non-routine transactions. Both the purchase of fixed assets for cash and on credit are important transactions that would be recorded in the journal proper.

Therefore, both Option 1 (Purchase fixed assets for cash) and Option 2 (Purchase fixed assets on credit) would be recorded in the journal proper.

Answer

Purchase fixed assets for cash

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Which of the following transactions, will not use in journal proper 1. Purchase fixed assets on cash 2. Purchase fixed assets on credit?

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