Question

Farmco sold a tractor for $40,000 that they initially purchased for $30,000 cash from john deere. How is the $30,000 journalized?

Answer 1

Cash a/c. Dr. 30000

profit & loss a/c. Dr. 10000

To tractor a/c. 40000

Answer 2

Journal Entry

Explanation:

for Journalized we used accountancy basic rule

1. Increase in Asset is Debit

2. Decrease in Asset is credit

we need to pass entry of $30000.

Farmco Purchased  initially tractor from johndeere in cash

there are 2 aspects are shown on above transaction

Aspect 1. Tractor is Increase and Tractor is asset and Increase in Asset means Debit(According to Above Rule)

Aspect 2. Cash is Decreased by purchasing tractor and cash is asset and decrease in asset means credit (According to above rule)

Now, By Considering Aspect 1 and Aspect 2 . we pass a journal

Journal

Particulars                                       LF        Dr.(Amount)    Cr.(Amount)

Tractor   A/C          Dr.                                  $30000

    To Cash   A/C                                                                    $30000

(Being Tractor Purchased in cash)

Note: Always Pass entry using Above mention rule

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