Computer Purchase Entry

A computer purchase is a financial transaction.

It is recorded according to certain rules

Those are the Golden Rules of Accounting.

Such a recording process includes:

• Understanding the transaction
• Identifying the accounts
• The monetary value involved
• Determine the Account Category
• Applicable accounting rules

Steps to Record the Purchased Computer Journal Entry

We need to follow the above steps. So, let’s break down all the aspects of this computer purchase transaction.

1. Understand the Transaction: 

The understanding step means getting the essence of the transaction and its nature. Here, nature means to check whether it’s a routine business expense, (or) any non-current asset or liability, or a transaction related to the operating business. For the current scenario, the transaction can be the purchase of fixed assets or inventory. The type of entry to a record depends on the entity’s business.

2. Identify the Accounts: 

The transaction involves the GL Accounts – Computer and Vendor Payable Account. If the payment happens immediately, then we will replace the Vendor Payable Account with a Bank Account

3. Category of Account: 

Computers and banks are Assets and fall under the Real Account category. Computer Vendor Payable will be a liability, so it falls under the Personal Account category.

Also Read: Understanding Wasting Asset (Non-Current Asset)

4. Applicable Accounting Rules: 

Real Account: Debit what comes in and Credit what goes out

Personal Account: Debit the Receiver and Credit the Giver

Now we understand the transaction and have all the necessary fundamentals to record the journal entry. So, we are all set to move into the primary aspect of this article.

Purchased Computer Journal Entry

We can record the transaction using two approaches. The first one involves the Vendor payable GL, and the other excludes such liability accounts. We can follow either approach. However, the result (journal entries) will be the same.

Primary Approach

1) Recording the consideration payable to the Vendor for the Purchased Computer

2) Payment to the Vendor

If the transaction relates to the operating business, the computers purchased will be in inventory. However, if the asset purchases are to obtain economic benefits for more than 12 months and help in conducting business, we call such purchases fixed assets. 

Fixed assets support businesses either directly or indirectly. The word direct here means assets held for the production of goods. For example, there is a Plant and machinery that manufactures the goods traded by the entity. Such Machinery will help in conducting the business, so it directly supports the company. 

Some fixed assets, such as buildings, computers, and furniture, will be used for administrative purposes. Such assets indirectly ensure that the business is run smoothly and effectively.

Secondary Approach:

Irrespective of its usage and type of fixed asset, wear and tear will typically occur due to everyday use. Therefore, depending on their valuable assets, we need to charge a portion of them to the profit and loss statement. So, let’s learn how to record the depreciation expenses.

There are different methods of calculating depreciation expense. One of the best methods is the straight-line method. The calculation is straightforward. We arrive at the annual depreciation by dividing the total cost of the assets by their useful life. So, there isn’t any complex formula for the straight-line method of depreciation—it’s very simple.

Frequently Asked Questions

When a computer is purchased, which account will be debited?

Computer Purchases result in creating a non-current asset to the business. The description of GL can be a Computer or a Laptop. So, we will debit the Computer GL to record the purchases.

Also Read: Contingent Assets

Depreciation on the computer journal entry

Depreciation is a non-cash expense. We will record it by debiting the Depreciation account and crediting the computer account. However, there is a different approach to recording depreciation than accumulated depreciation. Let’s learn those entries with an example.

ABC Ltd purchases a computer worth $10,000. According to general industry practice, the computer’s useful life is ten years. So, the Annual depreciation will be $1,000.

Entry to record the Purchases

Entry to record the accumulated depreciation

The above approach discloses the fixed assets at Gross, and all the depreciation will hit the accumulated depreciation. This Accrued depreciation can be shown under the liability side of the balance sheet or deducted from the gross fixed assets to arrive at the net computer balance.

Purchase of a Computer for office use will be recorded in

Computer or laptop purchases for office use can be recorded in the Computer GL account (non-current nature).

Purchased a computer for the office

The purchase of Computers for the office supports the administration and does not involve the production of goods. Even though those are for administrative purposes, we will consider them fixed assets. So, we can record such purchases through Computer GL in the journal entry.

How do you record a laptop purchase in a credit journal entry?

Laptop purchases made on Credit require following the first approach mentioned above. So, we need to debit the Computer and Credit the liability account to record the transaction. When the payments happen, we will debit the liability account and Credit the bank account. Refer to Tables 1 and 2 above. Therefore, we can record these purchases under the Computer & Equipment head irrespective of whether it is a Computer or a Laptop.

How do you record a journal entry when purchasing a computer with a printer?

It’s pretty standard to purchase a printer with a Computer. We need to understand whether the printer requires a separate disclosure. The thumb rule here is to check whether the printer’s useful life and depreciation method are the same or different. If it’s the same, we can record both the assets as Computer & Equipment. The entry will be the same as the above tables in both scenarios (irrespective of whether printer disclosure is separate or not)

Conclusion for Purchased Computer Journal Entry

The Computer Journal entry is to record the Computer or laptop purchases made for administrative purposes or as inventory. The method and way of recording aren’t different; the difference is that the GL is only grouped under the appropriate heading within the accounting package. The entry will be debited to the Computer and credited to the Vendor to record the purchase transaction. The Vendor GL will be debited, and the Bank needs to be credited on the payment date. Therefore, the net entry will be debited to the computer and credited to the bank account.

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