Which journal entry correctly records the purchase of equipment for $\$12,000$ on credit (no cash paid at the time of purchase)?

• A. Debit Expense $\backslash (12,000$; Credit Accounts Payable $\backslash )12,000$.
• B. Debit Equipment $\backslash (12,000$; Credit Cash $\backslash )12,000$.
• C. Debit Equipment $\backslash (12,000$; Credit Accounts Payable $\backslash )12,000$.
• D. Debit Accounts Payable $\backslash (12,000$; Credit Equipment $\backslash )12,000$.

Answer: (C)

Verified step by step guidance

1. Identify the nature of the transaction: purchasing equipment on credit means acquiring an asset without immediate cash payment.
2. Determine the accounts affected: Equipment (an asset account) increases, and Accounts Payable (a liability account) increases because the payment is deferred.
3. Apply the accounting rule that asset accounts increase with a debit, so Equipment should be debited for the purchase amount.
4. Apply the rule that liability accounts increase with a credit, so Accounts Payable should be credited for the same amount.
5. Formulate the journal entry as: Debit Equipment \$12,000; Credit Accounts Payable \$12,000, reflecting the increase in assets and liabilities.