In: Accounting
Tim Smith purchases a truck for $38,000. Tim debits an account, truck, and credits ...
Select one:
a) An asset account
b) A liability account
c) An owner's equity account
d) None of the above
Answer is option b) A liability account
Explanation :
Tim has purchased the truck for $38,000. Since, it is not mentioned that he has made the payment, he will credit a liability account (Notes Payable).
Note : In case, if it was mentioned that Tim has purchased the truck for cash, then he would credit an asset account (Cash).