Question

A restaurant purchases land and buildings with a cash down payment and the balance financed by a mortgage. What bookkeeping accounts are affected?

Answer 1

The journal entry for the transaction would be as follows :

Land and Buildings A/c Dr.

To Bank A/c

To Mortgage A/c

(Being purchase of land and buildings through cash down payment and balance financed by mortgaged)

The other option is to pass separate journal entries as depicted below :

The land and buildings purchased on cash down payment would be accounted as follows :

Land and Buildings A/c Dr.

To Bank A/c

(Being amount paid towards the purchase of land and buildings)

The balance financed through mortgage would be accounted as follows :

Land and buildings A/c Dr.

To Mortgage A/c

(Being mortgage obtained for the purchase of land and buildings)

Accordingly, the following book-keeping accounts are affected :

1. Land and buildings

2. Bank

3. Mortgage