Debit and Credit Ledger selection on Purchase of Fixed Assets

Business organizations purchase Fixed Assets for growth and maintenance of their business.

Let's come to a discuss on transactions for purchase of Fixed Assets.

In the Books of Mr.Sanjay Gupta the below mentioned transaction occurred.

Purchased Furniture & Fixtures from Ankur Industries as per Cash Memo No-5003 for ₹18,100/- 

Here Furniture and Fixture is not a trading goods, purchased for the purpose of long term use in office.  So,Furniture & Fixture A/c is under the Account Head Fixed Assets.

Steps and Procedures for Decision making for Debiting and Crediting of Ledger Accounts of the above transaction.

Step - 1

In first step,we have to identify the Ledger Accounts involved in the above transaction.

As a result,we found two Ledger Accounts

One is Furniture & Fixture A/c and another is Cash A/c 

Purchase of Fixed Assets
Step - 2 

In second step,we have to find out the type of Ledger Accounts involved by using either one of the Accounting Approach.

The above two Ledger Accounts mentioned in step-1 are related to type

Real Account(Furniture & Fixture A/c) and Real Account(Cash A/c) in Traditional Approach.

Asset Account(Furniture & Fixture A/c) and Asset Account(Cash A/c) in Modern Approach.

Type of Ledger Accounts involved on Purchase of Fixed Assets

Step - 3

In third step,we have to look at the nature or flow of the Ledger Accounts involved by using either one of the Accounting Approach.

Furniture & Fixture A/c,comes in and Cash A/c goes out for the business in Traditional Approach.

Furniture & Fixture A/c(Asset Account) increases and Cash A/c(Asset Account) decreases in Modern Approach.

Flow of Ledger Accounts on Cash purchase of Fixed Assets
Step - 4

In fourth and final step,now it is time to place the Ledger Accounts in their respective column, i.e Debit Column or Credit Column by applying the Debit and Credit Rule using either one of the Accounting Approach.

Debit and Credit Rule
As a result,Furniture & Fixture A/c shows a Debit effect for ₹18,100/- and 

Cash A/c shows a Credit effect for ₹18,100/-

Cash Purchase of Fixed Asset
 
Location: Delhi, India

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