If you purchase equipment on credit, which journal entry is recorded?

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

Answer: (B)

Buying equipment on credit means you acquire an asset now and incur a liability to pay later. In double-entry accounting, increases to assets are recorded with debits, and increases to liabilities are recorded with credits. Therefore, you debit Equipment to show the asset has risen and you credit Accounts Payable to reflect the new obligation to pay the supplier. Cash isn’t involved because payment hasn’t been made yet. If you had paid with cash, the entry would be Debit Equipment and Credit Cash. Debiting Accounts Payable would reduce the liability, which isn’t correct when you’re incurring it. Crediting Equipment would reduce the asset, which is the opposite of what happened. Debiting Revenue and credit Cash relates to a sale, not the purchase of equipment.