Antics Electronic Company recently bought six generators. Which of the following is the correct method of recording this transaction?
Debit generator account and credit cash account
Debit purchases account and credit cash account
Debit cash accounts and credit purchases account
Debit cash account and credit generator account
Explanation
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Based on the principle of double entry system,Debit(Dr) the Receiver and Credit(Cr) the giver or Debit(Dr) what comes in and Credit(Cr) what goes out,Generator acct is receiving,while cash acct is given i.e money is entering cash acct being paid for a good so it is Credited(Cr) while a good is entering which is the generator so it is debited(Dr).
Pls observation, i agree with @PEENELSON, the company is an electronic company and generator is an electronic, the generator bought is meant for sale and not use and so the correct answer is B, you guys should check well when an item is regarded as an asset or purchase and when meant for sale or not, the nature of the business or type of trade must be considered before you know if an item is for sale or not, six generator can not be bought and used at a time. Thank u. Option A is wrong. Whether buy or bought means same things and can mean purchases or not but depend on the nature of the business.
According to the question as written, it says:
“Antics Electronic Company recently bought six generators.”
The question did not say the generators were for resale. In accounting, when goods are not stated to be for resale, we assume they are assets used in the business.
So the generators are treated as equipment (fixed asset).
Correct Entry
Debit Generator Account
Credit Cash Account
✅ Correct option: A
If the examiner wanted Purchases Account, they would have written something like:
“bought six generators for resale.”
U guys are yet 2 giv me cogent reasons it is generator''s a/c rather than purchases a/c. In as much as d principle of double entry is observed, it is important 2 undastnd d nature of d firm''s economic transactn as an external observer in order 2 make d right recording. Frm d company''s name, we can undastnd dey deals on electronics hence d generators purchased can''t b 4 resale which wuld hv made purchases a/c 2 b debit. Sinc it is otherwise, generator as a fixed asset is debited. Thanks!
Option "A" is the ans dr Generator acct and cr Cash acct.why?bcoz Generator is a fixed asset and all fixed asset have debit balance,there by using the double entry rule,we r 2 dr generator acct and credit cash acct coz it gives out d money
You debit the reciever account and credit the givers account.Generator account will be debited because it was added while cash that was given out to recieve generator will be credited
it base on principle of double entry, Dr de receiver and Cr de giver, is suppose to be, debit purchases and credit cash accout
Here is an explanation:
the company in the question deals with electronics buy 6 gen means its for re-sale if it fixed asset it will stated above bought gen not 6 GEN. Then use your nornal double entry.
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Yes, U r all right. In every business transaction, there must b a giver and a receiver of value and dat z where d principle of double entry set in. It simply means; debit d receiver and credit d giver. Cash a/c gives(Cr) and Generator a/c receives(Dr).
from the question, the company is selling electronic, that is; the Generator bought is meant for re-sale not fixed asset. option B is the correct answer, Debit purchase account and credit cash book
Pls observation, i agree with @PEENELSON, the company is an electronic company and generator is an electronic, the generator bought is meant for sale and not use and so the correct answer is B, you guys should check well when an item is regarded as an asset or purchase and when meant for sale or not, the nature of the business or type of trade must be considered before you know if an item is for sale or not, six generator can not be bought and used at a time. Thank u. Option A is wrong
