When a business purchases a refrigerator, they would typically record the transaction in their accounting records through journal entries. Journal entries are used to record financial transactions in chronological order. In this case, the refrigerator purchase would involve both cash and a tangible asset (the refrigerator). Here's how the journal entries might look:
Assuming the business bought the refrigerator for $1,500 in cash:
- Purchase of Refrigerator on Cash
Date: [Date of Purchase]
| Account | Debit ($) | Credit ($) |
|---|
| Refrigerator (Asset) | 1,500 | |
| Cash (or Bank) | | 1,500 |
Explanation: The business debits the "Refrigerator" account to increase the asset's value (the new refrigerator). At the same time, they credit the "Cash" or "Bank" account to reduce cash since the purchase was made in cash.
If the business purchased the refrigerator on credit instead of cash, the entry would be different:
- Purchase of Refrigerator on Credit
Date: [Date of Purchase]
| Account | Debit ($) | Credit ($) |
|---|
| Refrigerator (Asset) | 1,500 | |
| Accounts Payable (Creditor) | | 1,500 |
Explanation: In this case, the business still debits the "Refrigerator" account to increase the asset's value, but instead of crediting cash, they credit the "Accounts Payable" account, as they now owe the amount to the supplier or creditor.
It's important to note that the specific accounts used in the journal entries may vary depending on the company's chart of accounts and accounting practices. Additionally, any applicable taxes or discounts should also be accounted for in the journal entries.
The journal entries above would then be posted to the respective ledger accounts and become part of the overall accounting records. These transactions will contribute to the calculation of the company's financial statements and help track the value of assets and liabilities.