Journal Entry for Computer Purchase

Computer purchase is the process that a company acquires company for its internal use.

The computer is classified as a fixed asset when company purchases it for internal use. It is the company assets that management intends to use to support the operation. They are expected to use the computer for more than a year. So it will be recorded as noncurrent assets as the computer and equipment.

As the computer is considered a fixed asset, its value will be decreased over time. The company needs to depreciate the computer over the useful life. It is the way that we classified the fixed assets to depreciation expense on the income statement. The useful life is based on the company policy and management estimation. Most companies will depreciate the company between 3 to 5 years. Company will take the total cost and divide it by the useful life to get the depreciation expense per year.

The cost of computer will include all the costs that bring computer into use. It may include the purchase price, transportation fee, installation, and other professional fees if required.

The computers will be classified as inventory if the company purchases them for resell. The items are the inventory that will be classified as current assets. And it will reclass to cost of goods sold when the company sells those computers to the customers. These computers will not be depreciated over time.

Journal Entry for Computer Purchase

When the company purchases computer, an accountant needs to record fixed assets increase and cash payment if they use cash payment. If the company purchase on credit, they need to record accounts payable.

The journal entry is debiting fixed assets and credit cash or account payable.

The fixed assets will be classified

Journal Entry for Computer Purchase Example

ABC is a company that sells a variety of goods to consumers. During the month, company has purchased the computer for the cashier. The computer costs $ 1,500 and company expects to use it for 5 years. The company uses cash to pay for the computer immediately.  Please prepare the journal entry for the computer purchase.

When ABC purchase a computer, they need to record fixed assets on the balances sheet. They need to reduce cash as they pay immediately.

The journal entry is debiting fixed assets $ 1,500 and credit cash $ 1,500.

The fixed assets will increase by $ 1,500 on the balance sheet. The cash balance will decrease by $ 1,500 as the cash is paid to the supplier.