Question

A car was purchased for bills enterprice in the amount of 18,000: 20% was paid in cash and a promissory note was signed for the remaining balance

how would I make a journal entry of this?

Answer 1

Journal entry to record purchase of car in the books of bills enterprice:

Date	Accounts	Debit	Credit
	Car	18000
	Cash		3600
	Note payable		14400
	(To record purchase of car)

When car is purchased value of assets increases, to increase asset balance it is debited. When 20% cash is paid cash balance gets reduced, so it is credited. So remaining amount becomes liability to the entity, so to increase liability balance it is credited.

Note :

Value of Notes payable = car value - cash paid

= 18000 - (18000*20%)

= 18000 - 3600

= 14400