17- If a cheque of 15000 is received from sale of Machine and deposited that amount on the same day.
Show what is the journal for these transaction.
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Answers
This transaction uses cash which is an asset and purchases a piece of Machinery, which is also an asset. Assets are increased by debiting the account, and decreased by crediting the account. So in this situation you would credit the checking account for the purchase price of the machine and debit an asset account set up for the machine (printing press, band saw, or whatever appropriate name). The credit in your checking account would correctly reduce the amount you have available and the debit in the machine account would increase the company assets by the cost of the machine. This transaction would essentially be a wash because the amount taken out of the checkbook would equal the amount of the new piece of Machinery so it would just be moving the asset from one area to another (cash to a machine). However you would also need to create two accounts in order to keep track of the depreciation of the piece of Machinery. The first account is called an accumulated depreciation account, which is a contra account to the machine asset account. Then as depreciation is recorded as an expense, this account will be used to keep track of it. Entries into this contra account will decrease the value of the machine but you will always be able to see its original cost in its main account . The second account you need to create is a depreciation account for the machine to record the actual expense of the depreciation. The balances in the machine and accumulated depreciation accounts are carried forward from year to year but the balance in this expense account is cleared out at the end of the tax year. It is used to keep track of the yearly expense of depreciation for the machine. Smaller companies may use just one expense account to record all of their depreciation cumulatively. Larger companies may wish to separate out the depreciation by asset