In a perpetual accounting system, which journal entry records the purchase of equipment on account (on credit)?

• A. Debit Supplies Expense; Credit Accounts Payable
• B. Debit Equipment; Credit Cash
• C. Debit Equipment; Credit Accounts Payable
• D. Debit Accounts Payable; Credit Equipment

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the nature of the transaction. Purchasing equipment on account means acquiring equipment but not paying cash immediately; instead, the company owes money to the supplier.
2. Step 2: Identify the accounts involved. The Equipment account increases because the company gains equipment, and the Accounts Payable account increases because the company has a liability to pay in the future.
3. Step 3: Determine the type of accounts and their normal balances. Equipment is an asset account (normal debit balance), and Accounts Payable is a liability account (normal credit balance).
4. Step 4: Apply the rules of debit and credit. To increase an asset, debit the Equipment account. To increase a liability, credit the Accounts Payable account.
5. Step 5: Formulate the journal entry. Debit Equipment to record the increase in assets, and credit Accounts Payable to record the increase in liabilities, reflecting the purchase on credit.