Assets & depreciation · Level: Basics
Journal entry: Buying office furniture
Furniture is used for several years, so it is recorded as an asset, not an expense.
Worked example
We buy office furniture on credit from Taylor & Sons for £7,350.00 plus 20% VAT.
Correct journal entry
Office equipment £7,350.00, Input VAT £1,470.00 / Trade payables £8,820.00
Debit
Office equipment£7,350.00
Input VAT£1,470.00
Credit
Trade payables£8,820.00
Why?
- Office equipment: asset increases → debit
- Input VAT: asset increases → debit
- Trade payables: liability increases → credit
Calculation
- VAT: 20% of £7,350.00 = £1,470.00
- Gross amount: £7,350.00 + £1,470.00 = £8,820.00
Typical mistake
Booking the furniture as an expense.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
We buy office furniture on credit from Hughes Trading for £8,700.00 plus 20% VAT.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for buying office furniture?
Example: Office equipment £7,350.00, Input VAT £1,470.00 / Trade payables £8,820.00.
How do I recognise this case?
Furniture is used for several years, so it is recorded as an asset, not an expense.
What is the typical mistake?
Booking the furniture as an expense.