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Homework answers / question archive / Describe how the purchased land for cash affects the three elements of the accounting equation
Describe how the purchased land for cash affects the three elements of the accounting equation.
A purchase of land for cash will have no effect on all elements of the accounting equation which are assets, liabilities and equity.
The proforma journal entry for this transaction is as follows:
| Account | Debit | Credit |
|---|---|---|
| Land | XXX | |
| Cash | XXX |
Land and cash are both assets, a debit on assets increases it while a credit decreases it. A debit and credit on asset account with equal amounts will leave the total amount of asset to be unchanged.
