Journal Entry for Purchase of Building by Z Ltd

The purchase of a building by Z Ltd can be recorded in the following journal entry:

Date Account Titles Debit Credit
Building 220,000
Cash 110,000
Debentures Premium 110,000

Explanation of the Journal Entry

The above journal entry can be explained as follows:

1. Building: The building account is debited with the cost of the building, which is 220,000.

2. Cash: The cash account is credited with the amount paid in cash, which is 110,000.

3. Debentures Premium: The debentures premium account is credited with the amount raised through the issue of debentures at a premium of 10%, which is 110,000.

The above journal entry shows that Z Ltd purchased a building for 220,000, out of which half of the payment (110,000) was made in cash and the balance (110,000) was raised through the issue of debentures at a premium of 10%.

Conclusion

The recording of transactions in a journal is an important step in the accounting process. The above journal entry shows how the purchase of a building by Z Ltd can be recorded in the books of accounts. It is important to note that the journal entry should be supported by relevant documents, such as purchase invoices, bank statements, and debenture certificates, to ensure accuracy and transparency in the accounting records.