Hi,
When delivery eqipment is purchased on account, the transaction to be recorded by the purchaser inclues debiting:
A: Delivery Equip & crediting AP
B: Delivery Equip & crediting Cash
C: Delivery Expense & crediting AP
D: Delivery Expense & crediting Cash
My answer is D. I'm I correct?
To determine the correct answer, we need to understand the nature of the transaction.
When delivery equipment is purchased on account, it means that the transaction does not involve immediate cash payment but instead the purchaser will be charged for the purchase and will pay at a later date.
The correct answer would be A: Delivery Equipment & crediting Accounts Payable (AP).
Here's the explanation:
1. Debit Delivery Equipment: When the delivery equipment is purchased, it is considered an asset for the purchaser. Therefore, the account "Delivery Equipment" is debited. This increases the value of the asset on the balance sheet.
2. Credit Accounts Payable (AP): Since the transaction is done on account, the purchaser owes money to the supplier. To record this liability, the account "Accounts Payable" is credited. This reflects the amount owed to the supplier.
D, which suggests crediting Cash, is not the correct answer because no immediate cash payment is involved. The payment will be made at a later date, as per the account terms with the supplier.
Therefore, the correct answer is A: Delivery Equipment & crediting Accounts Payable (AP).