Purchase furniture journal entry

Purchase Furniture Journal entry is to record asset purchase.

Furniture Purchases can be either Inventory or Fixed Assets to the buyer, depending on the circumstances.

If the Entity is in the business of buying and resale Furniture, then the appropriate classification will be Inventory.

On the contrary, if the Furniture Purchases is for the building interior design, it will be part of the non-current asset (Fixed asset).

Accounting requires recording all financial transactions in the books of accounts.

Accordingly, we need to record the Purchase Furniture Journal entry with a debit to the Furniture and credit to the Bank if payment occurs immediately or Vendor if this is a credit transaction.

Purchase Furniture Journal Entry

Any transaction can be of two different types.

It can be either Cash or Credit transaction.

So, we will learn how to record both the transactions.

Lets first see how the Furniture Purchased Journal entries are recorded. Later on, we will move on to understand the logic behind them.

1) Cash Transactions

2) Credit Transactions

Recording of every transaction involves a minimum of two GL Accounts. Accordingly, this purchase has Furniture A/c and Bank A/c or Vendor Payable A/c. The accounts involved here are Asset A/c and Liability A/c (Vendor).

Per Accounting Rules, Debit What Comes in and Credit What Goes out for all Asset GL and Debit the Receiver and Credit the Giver for all Liability GL.

So, we will be recording the above journal entries as per the above rules.

Also Read: True Up Journal Entry

How about a tricky example?

Lets assume Philip is a practicing attorney who wants to renovate his office premises by buying elegant and stylish furniture. He purchased the furniture partly through Cash and exchange.

Here are details:

Cost of Furniture equals $30,000

75% of the payment is in Cash, and the balance is through existing furniture. But the book value of the old furniture is $14,000.

The transaction is not straightforward and appears to be an intricate process. So, his accountant is unsure how to record this furniture purchase journal entry and requests professional help from us.

Roll up your sleeves. We got some work here.

Let’s understand the exchange value, which is 25% of the furniture cost = $7,500. However, the book value is $14,000. So, the exchange happened at a loss of $6,500.

We can start with basic entry, assuming full cash payment.

Now, I will record the entry with part payment in cash and exchange. There will not be any change in the debit side because the value of new furniture doesn’t change with mode of payment.

Change happens on the credit side. Credit Bank/Cash by 75% of furniture cost. 

The credit side balance is recorded by removing the old furniture value from books.

Journal entries don’t stop here.

We need to make sure the business shows a different position. The remaining value must also be addressed if the furniture is exchanged and partly removed from books. Otherwise, it results in financials showing the asset value, which is not an incorrect picture.

The following journal entry is to be recorded in the books.

FAQ’s relating to Purchase Furniture Journal Entry:

Understanding just the journal entry is not sufficient to get a comprehensive knowledge.

There will be lot of varied questions arises when we need to do practical application of journal entries. Let’s see a couple of them.

What is the journal entry for the cash purchase of Furniture?

Interpretation of the word Cash Purchase shall not be with its literal meaning of purchases through physical cash.

We use the two terms Bank transaction and Cash transactions interchangeably in business transactions. So, the above first journal entry is to record the Cash purchase of Furniture.

Also Read: Sold Furniture Entry

When Furniture is purchased on credit, the entry will be recorded in?

Purchases without full payment immediately are credit transactions.

We record such transactions by debiting the asset account and crediting the liability account. Refer to the second entry above.

Read also: Audit of Furniture

Is buying furniture debit or credit?

Buying Furniture will be an asset to any business or for personal use.

Per the accounting rules, we need to debit the assets to increase it. Therefore, buying Furniture will record on the debit side of the journal entry.

What is the journal entry for bought office furniture by Cheque?

The Mode of Payment here is Cheque, and the common practice of recording financial transactions is through Bank GL.

Furniture GL and Bank GL will be debited and credited respectively to record this transaction of buying office furniture by Cheque.

Is furniture debit or credit in trial balance?

Furniture being an asset (either Current or Non-Current) will have a debit balance. As such, the Furniture will be on the debit side of the trial balance.

Is Furniture and fixtures debit?

Yes, Furniture and Fixtures will be debited as an asset GL.

Is office furniture an expense or asset?

The answer depends on the quantitative value, usage, and asset capitalization policy of the Entity that purchases. Let’s break it down.

For example, an entity purchases bookshelves to support the well-being of its employees. The monetary value is $5,000, and the value of this Furniture is very immaterial at the entity level. Moreover, the asset capitalization policy defines the requirement for capitalizing the asset purchases. Therefore, if the monetary value and capitalization policy hold good for any purchases, we can go ahead and capitalize such Furniture as an asset.

If the scenario is contrary, then it’s appropriate to write down the purchases as an expense even though the benefits arising from it are for a period of more than a year.

Can you capitalize Furniture?

Yes, Furniture can be capitalized if all the criteria mentioned above are satisfied.

Also Read: Cash Coverage Ratio

Journal entry of Furniture purchased for personal use

There is no requirement for individuals to maintain the books of accounts. However, if there are purchases of personal assets then the recording of those journal entry will not be different from the ones which are above.

We hope these above questions and answers help resolving in major ambiguity in relation to record the furniture purchase. If at all there are any other questions then pls feel free to reach to us through comments.

Summary & Conclusion:

Bought office furniture for cash journal entry is to record the Purchases by debiting the Furniture with a corresponding credit to the Bank GL or Liability GL (if it’s a credit transaction). However, the Entity can write off the furniture purchases as expenses owing to the immaterial value. Just like any asset, there will be depreciation on Furniture GL based on its useful life. So, we need to present the net furniture balance or alternatively disclose the gross furniture along with the accumulated depreciation. Hope this article provides good understanding of recording the furniture purchase.