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Does the accrual method apply to the purchase of equipment?

Author:
Harold Averkamp, CPA, MBA

The accrual method does apply to the purchase of equipment (as well as applying to revenues and expenses).

To illustrate, let’s assume that on December 29 a company ordered and received some equipment to be used in its operations. The payment for the equipment is to be made on February 10. Under the accrual method, on December 29 the company should debit the asset account Equipment and credit the liability account Accounts Payable. (When the supplier or vendor is paid on February 10, the company’s asset Cash will be credited and its liability account Accounts Payable will be debited.)

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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