Computer Purchase Entry

A computer purchase is a financial transaction.

It is recorded according to specific 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 refers to whether an expense is a routine business expense, a non-current asset or liability, or a transaction related to the operating business. In the current context, the transaction may involve the purchase of fixed assets or inventory. The type of record entry depends on the entity’s business.

2. Identify the Accounts: 

The transaction involves the GL Accounts: Computer and Vendor Payable. 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 and therefore 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. We are now ready to move on to the central aspect of this article.

Purchased Computer Journal Entry

We can record the transaction using two approaches. The first involves the Vendor-payable GL, and the other excludes such liability accounts. We can follow either approach. However, the result (i.e., the 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 purchased computers will be included in inventory. However, if the asset purchases are intended to yield economic benefits for more than 12 months and support business operations, we call such purchases fixed assets. 

Fixed assets support businesses either directly or indirectly. The term “direct” here refers to 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 enable business operations, thereby directly supporting the company. 

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

Secondary Approach:

Regardless of the type or use of a fixed asset, wear and tear typically occurs over time. Therefore, depending on the nature of their assets, we need to charge a portion of them to the profit and loss statement. Let us learn how to record 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 calculate annual depreciation by dividing the total cost of the assets by their useful lives. There is no complex formula for the straight-line depreciation method—it’s straightforward.

Frequently Asked Questions

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

Computer Purchases result in the creation of a non-current asset for 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 an alternative to the accumulated depreciation method for recording 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 fixed assets at Gross, with all depreciation recorded in accumulated depreciation. This Accrued depreciation can be recorded on the liability side of the balance sheet or deducted from 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 may be recorded in the Computer GL account (non-current).

Purchased a computer for the office

The purchase of Computers for the office supports the administration and does not involve the production of goods. Although these are for administrative purposes, we will treat them as fixed assets. We can record such purchases in the journal entry using Computer GL.

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

Laptop purchases made on Credit require following the first approach mentioned above. We need to debit the Computer account and Credit the liability account to record the transaction. When payments are made, 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, regardless of whether they are Computers or Laptops.

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 of recording is unchanged; the difference is that the GL is 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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