Purchased machinery for Rs. 1,00,000 and issued a cheque. In this situation which account will be debited ?

Question

Accepted Answer

The correct option is 1:
When a business purchases an asset like machinery, the transaction must be recorded according to the Double-Entry System of accounting. Machinery is classified as a Real Account, which represents assets and liabilities of the firm. The Golden Rule for a Real Account is "Debit what comes in, Credit what goes out." Since the machinery is physically coming into the business and increasing the firm's assets, the **Machinery Account** is correctly debited with the cost of Rs. 1,00,000. This debit entry records the acquisition of the new fixed asset, thereby correctly showing the increase in the machinery asset on the Balance Sheet.

The incorrect option is 2:
**Bank Account** will be credited, not debited. The Bank Account is also classified as a Personal Account (or an asset, Real Account) in this context. The question states that a cheque was issued for payment, which means the funds are going out of the bank. Following the rule for Personal Accounts, "Debit the receiver, Credit the giver," the bank is the 'giver' of the funds, so the Bank Account must be credited. Alternatively, viewing it as a Real Account (asset), the asset (Bank balance) is going out/decreasing, hence it is credited.

The incorrect option is 3:
**Cash Account** is not affected by this transaction, so it cannot be debited. The transaction explicitly mentions that the payment was made by issuing a cheque. A cheque transaction involves the Bank Account, not the Cash Account. The Cash Account is used only when payment is made in physical currency. Therefore, since there is no movement of cash, the Cash Account remains unchanged for this particular entry.

The incorrect option is 4:
**Buyer's Account** is irrelevant in this context and will not be debited. The term 'Buyer's Account' is not a standard account title used in the purchasing firm's books for this type of transaction. Since the payment was made immediately via cheque, the transaction is considered a cash purchase, meaning no liability is created. A personal account for the *seller* would only be created if the machinery had been purchased on credit. The debit side must record the asset received, which is the Machinery Account.