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Journal Entry: Assets Purchased, Tangible Asset and Intangible Asset

Arjun EP

Published on: September 28, 2020

How to make journal entry for assets purchased (tangible and intangible assets)

Assets are the economic resources reported in the balance sheet.

Assets represent probable future economic benefits.

The values of tangible assets are also known as fixed assets.

They have their physical substance.

Fixed assets are land and building, plant and machinery, furniture and fitting, vehicle, equipment etc.

They are purchased to generate profit and make convenience for work.

By using assets, depreciation is charged on it.

After using asset for long time, it becomes out of order; then it is sold.

At the time of asset selling, there may be capitalized profit or loss.

The values of intangible assets are also known as fictitious asset but there are some differences.

Intangible assets do not have physical substance.

They are goodwill, licence, trademarks, patents, copyrights, brand equity etc.

They are purchased or invested for product design, sales promote and brand equity of the firm.

Assets or Fixed Assets

Plant and machinery account	Dr	Value of assets	Increase assets
Land and building account	Dr	Value of assets	Increase assets
Furniture and fitting account	Dr	Value of assets	Increase assets
Equipment account	Dr	Value of asset	Increase assets
Vehicle account	Dr	Value of asset	Increase assets
Computer/laptop account	Dr	Value of asset	Increase assets
To Cash account		Cash given	Decrease in assets
To Bank account		Cheque given	Decrease in assets
To XYZ Suppliers account		Credit purchased from firm	Increase in liabilities
To Bills payable account		Credit purchased and bill accepted	Increase in liabilities
(Being- assets purchased …………….

Keep in Mind (KIM)

We assume trader purchases and sales single or similar types of goods.
For computer trader, computers are goods.	For computer trader, shoes are not goods.
For shoes trader, shoes are goods.	For shoes trader, furniture is not goods.
For cloth merchant, cloth is goods.	For cloth merchant, car is not goods.
For furniture trader, furniture is goods.	For furniture trader, cloth is not goods.
For stationer, stationery is goods.	For stationer, furniture is not goods.
For car vendor, car is goods.	For car vendor, computer is not goods
For grocery vendor, rice, sugar, soap etc are goods.	For grocery vendor, furniture is not goods.

Journal Entry

In the book of …………

Date	Particulars		LF	Amount Dr	Amount Cr
	Plant and machinery	Dr		xxxxx
	Land and building	Dr		xxxxx
	Furniture and fitting account	Dr		xxxxx
	Equipment account	Dr		xxxxx
	Vehicle account	Dr		xxxxx
	Other assets account	Dr		xxxxx
	To Cash account				xxxxx
	To Bank account				xxxxx
	To XYZ Suppliers account				xxxxx
	To Bills payable account				xxxxx
	(Being- asset (name of asset) purchased…………

Journal Entry

In the book of …………

Date	Particulars		LF	Amount Dr	Amount Cr
	Goodwill account	Dr		xxxxx
	Trademark account	Dr		xxxxx
	Patents account	Dr		xxxxx
	Copyrights account	Dr		xxxxx
	To Cash account				xxxxx
	To Bank account				xxxxx
	(Being- intangible assets purchased

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 4A

SK Book Supplier purchased furniture worth Rs 60,000

Required: Journal entry

[Answer: Asset = Rs 60,000]

SOLUTION:

Journal Entry

In the book of SK Book Supplier

Date	Particulars		LF	Amount Dr	Amount Cr
	Furniture account	Dr		60,000
	To Cash account
	(Being- furniture purchased in cash)				60,000

Journal Entry for American Style

Date		Debit $	Credit $
	Furniture account	60,000
	To Cash account		60,000
	To record furniture purchased for cash

Journal Entry for European Style

Date			€	€
	Furniture account	Dr	60,000
	To Cash account			60,000
	To record furniture purchased for cash

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 4B

Ajay Cold Store purchased deep-freezer for Rs 45,000 and furniture for Rs 25,000 by cheque.

Required: Journal entry

[Answer: Assets = 70,000]

SOLUTION:

Journal Entries

In the book of Ajay Cold Store

Date	Particulars		LF	Amount Dr	Amount Cr
	Deep-freezer account	Dr		45,000
	To Cash account				45,000
	(Being- deep-freezer purchased in cash)
	Furniture account	Dr		25,000
	To Bank account				25,000
	(Being- furniture purchased by cheque)

Journal Entry

In the book of Ajay Cold Store

Date	Particulars		LF	Amount Dr	Amount Cr
	Deep-freezer account	Dr		45,000
	Furniture account	Dr		25,000
	To Cash account				45,000
	To Bank account				25,000
	(Being- deep-freezer and furniture purchased in cash)

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 4C

JK Soap Industry has purchased following assets:

Computer by cheque Rs 30,000

Printer for cash Rs 10,000

Furniture Rs 7,000 from Sharma Furniture Traders

Required: Journal entry

[Answer: Assets = 47,000]

SOLUTION

Journal Entries

In the book of JK Soap Industry

Date	Particulars		LF	Amount Dr	Amount Cr
	Computer account	Dr		30,000
	To Cash account				30,000
	(Being- computer purchased and cheque issued)
	Printer account	Dr		10,000
	To Cash account				10,000
	(Being- printer purchased in cash)
	Furniture account	Dr		7,000
	To Sharma Furniture Traders				7,000
	(Being- furniture purchased on credit)

Journal Entry

In the book of JK Soap Industry

Date	Particulars		LF	Amount Dr	Amount Cr
	Computer account	Dr		30,000
	Printer account	Dr		10,000
	Furniture account	Dr		7,000
	To Cash account				30,000
	To Bank account				10,000
	To Sharma Furniture Traders				7,000
	(Being- sundry assets purchased in cash and on credit)

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 4D

Saleways Departmental Store has following information:

July 2, Took trademark from Saleways Departmental Store by paying Rs 55,500 by cheque.

July 3, Mini truck purchased from Sipardi Auto at Rs 800,000.

July 12, Air conditioner purchased for Rs 80,000 and cheque issued.

July 18, Furniture purchased worth Rs 25,000 by cash.

July 31, Ceiling fans purchased from Bipin Rs 10,000.

Required: Journal entries

SOLUTION

Journal Entries

In the book of Saleways Departmental Store

Date	Particulars		LF	Amount Dr	Amount Cr
July 2	Trademark account	Dr		55,500
	To Bank account				55,500
	(Being- trademark purchased by cheque)
July 3	Mini truck account	Dr		800,000
	To Sipardi Auto account				800,000
	(Being- mini truck purchased on credit)
July 12	Air conditioner account	Dr		80,000
	To Bank account				80,000
	(Being- air conditioner purchased by cheque)
July 18	Furniture account	Dr		25,000
	To Cash account				25,000
	(Being- furniture purchased in cash)
July 31	Ceiling fans account	Dr		10,000
	To Bipin’s account				10,000
	(Being- furniture purchased on credit)

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

PROBLEM: 4E

Chaudhary Group (CG) has following extracted information:

(a) Patent purchased from LG Electronics, South Korea by paying Rs 25,00,000 through Nabil Bank online banking.

(b) Copyrights purchased from Turkcell Telecommunication, Turkey to operate CG Lifecell mobile network service of Rs 50,00,000 by online payment.

SOLUTION

Journal Entries

In the book of Chaudhary Group

Date	Particulars		LF	Amount Dr	Amount Cr
(a)	Patents account	Dr		25,00,000
	To Nabil Bank account				25,00,000
	(Being- patents purchased from LG Electronics through
	online payment)
(b)	Copyrights account	Dr		50,00,000
	To Bank account				50,00,000
	(Being- copyrights purchased from
	Turkcell Telecommunication through online payment)