Question

Steve Smith is running a departmental store in Adelaide. He bought the following items:
I. a truck for $150,000;
II. office stationeries for $10,000 which would be used in the current month.
Requirements:
I. What is an asset and an expense? How these things are different in accounting?
II. Provide journal entries for the two transactions.

Answer 1

I) An Asset is an resource or an property owned by an enterprise which is used for the purpose of generating revenues. It is capitalized in the books of accounts and shown in the balance sheet. An expense is a cost incurred for the purpose of generating revenue. It is charged in the profit and loss account from the current period profit. In this way the accounting for both is different.

II) Journal Entries (Amounts in $)

No.	Account Titles and Explanations	Debit	Credit
I)	Truck	150,000
	Cash		150,000
	(To record the purchase of truck)
II)	Stationery Expense	10,000
	Cash		10,000
	(To record the stationery expense for the month)