Accounting transaction help?
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hey everyone,
i have a small question which involves accounting transaction:
-- On july 1 Bob arms deposited $15, 000 cash in a bank account in the name of the business. Bob's trucking & rental services. Bob also contributed office and computer equipment having a value of $ 5000. This equipment also had a bank loan attached in the amount of $2000. Bob had made arrangements to pay interest only at the end of the month. The current interest rate is set at 7% annum.
So for the first sentence it makes sense to debit cash 15000 and credit capital 15000.
but the confusing part is after the second sentence so i would greatly appreciate if anyone knew what accounts were affected by this transaction
thx in advance
Accounting transaction help?July 1
Dr Cash at bank $15,000
Dr Office/computer equipment $5,000
Cr Bank loan payable $2,000
Cr Owner's capital $18,000
July 31
Dr Bank loan interest expense $11.89
(being interest at 7% on $2,000 for 31 out of 365 days)
Cr Cash $11.89
Accounting transaction help?The equipment of course comes into the books as though purchased by the business from the owner, it becomes a split transaction, 3000 to owner equity and 2000 to liability (bank) if the business is assuming the debt, or it is 5000 in owner equity (ignoring the owner's bank liability) if the debt is staying with the owner instead of being assumed by the business.
I would assume the business is assuming the bank loan AND its interest expense.
Each month as payment is due we have to find money in the bank account to pay it, as interest expense. One would expect to also have transactions to repay principle to the bank, from bank account to bank loan liability.
The equipment is a depreciable capital account so it needs to be set up with an account for accumulated depreciation. While you only need one depreciation account for all equipment of a given class, you can keep separate accounts if most classes will contain only one or two pieces of equipment.
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