Question

Bostel wanted to expand the size of its warehouse in order to generate more profits. The company decided to purchase the building adjacent to its existing warehouse. The company pays for the building by borrowing from the bank. The purchase would be recorded a

Answer 1

The purchase would be recorded a Debit Buildings; credit Notes Payable

Explanation:

Any entry that helps in increasing asset value or accounts that are a associated with the expenses or helps in decreasing an equity account or liability refers to debit. An accounting entry that helps in increasing the equity account or liability and decreasing asset or expense account refers to credit.

In the given example, Bostel decides to expand the warehouse size and decides to purchase new building. Thus the value of asset is increased as the building is an asset to the company.  The building is purchased by borrowing loans from a bank. Thus this amount increases the expense account or in other words increase the liability of the company. Hence the entry should be  Debit Buildings; credit Notes Payable.