Question

Give the entry of purchase building for cash rs. 5000.

Answer 1

Answer:  Journal Entry will be --

                  Building A/c       (Dr.)       5000

                                 To  Cash A/c                         5000

                     (cash is being paid for the building)

Explanation:

Whenever an asset is purchased its nature is considered to be debit

and whenever cash is being paid its nature is considered to be credit.

The traditional Rule of Accounting for Debit and Credit states that -

Debit what comes in    &

Credit what goes out.

So, In this situation, the Building is coming into the business and

Cash is going out of the business.

Therefore the journal entry will be

Building A/c       (Dr.)       5000

      to  Cash A/c                         5000

(cash is being paid for the building)

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Answer 2

Answer:

                                     Journal Entry

Building A/C               Dr                 5000

                   To Cash A/C                                     5000

(Building purchased for Cash)

Explanation:

• Building and Cash are asset accounts.
• Asset account has a debit balance.
• We debit the asset account, when asset increases.
• We credit the asset account, when asset decreases.
• As building is added, we debit the asset account and as cash decreases, we credit the cash account.

Point to be noted:

We cannot enter the transaction as purchase account instead of building account. Purchase account contains entry of goods purchased that business deals in.

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