Dan purchased a new computer for \$200 for his business. Which of the following is the correct journal entry to record this transaction?

• A. Debit Expense \$200; Credit Accounts Payable \$200
• B. Debit Accounts Payable \$200; Credit Equipment \$200
• C. Debit Cash \$200; Credit Equipment \$200
• D. Debit Equipment \$200; Credit Cash \$200

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the nature of the transaction. Dan purchased a computer for his business, which is considered an asset. Assets are recorded in the Equipment account, as the computer will provide future economic benefits to the business.
2. Step 2: Determine the accounts involved. The Equipment account will be debited because the business is acquiring an asset, and the Cash account will be credited because cash is being used to pay for the computer.
3. Step 3: Apply the double-entry accounting principle. Every transaction must have equal debits and credits. In this case, Debit Equipment \$200 and Credit Cash \$200 ensures the accounting equation remains balanced.
4. Step 4: Write the journal entry. The journal entry for this transaction is: Debit Equipment \$200; Credit Cash \$200. This reflects the increase in assets (Equipment) and the decrease in assets (Cash).
5. Step 5: Verify the journal entry. Ensure that the accounts affected align with the nature of the transaction and that the debit and credit amounts are equal, maintaining the integrity of the accounting equation.