ABC LTD bought a new motor van from park motor LTD on credit basis. What will be the journal entry in the book of ABC LTD to record this tranasation?
To record the purchase of a motor van on credit in the journal entry of ABC LTD, you need to consider that this transaction involves two accounts: the motor van account and the accounts payable account.
Here's how you can record the journal entry:
1. Identify the accounts involved:
- Motor Van
- Accounts Payable
2. Determine the effect on each account:
- Motor Van: Increase (as it is being acquired)
- Accounts Payable: Increase (as it represents the liability to Park Motor LTD)
3. Write the journal entry:
Date: [Date of Purchase]
Motor Van (Debit) [Amount]
Accounts Payable (Credit) [Amount]
Remember to input the actual amounts in the entry and ensure both sides of the equation (debits and credits) balance. The credit amount should be equal to the debit amount.
Please note that the journal entry is just the initial recording of the transaction. It will subsequently be posted to the respective ledger accounts to keep track of the details. Additionally, ensure you follow the specific guidelines and accounting regulations in your country or company.