Worked-example setupScope and assumptions
- The fictional entity begins with $2,000 cash contributed by its owner and no other balances.
- A purchase order alone creates no recognized asset or liability under the stated terms.
- Delivery gives the entity a present right to use $3,000 of supplies and a present obligation to pay the vendor.
- The supplies remain unused through the end of the example.
- Period
- One week; order Monday, delivery Wednesday, partial payment Friday
- Units
- USD
- Rounding
- Whole US dollars; no rounding required
Problem
In this standalone example, Alder Design has $2,000 cash and $2,000 equity before the week begins. It orders $3,000 of supplies Monday, receives the supplies on credit Wednesday, and pays the vendor $1,000 Friday. The supplies remain unused. Assume neither party performs before delivery, no deposit is paid, Alder obtains control on delivery, and no special contract-accounting requirement applies. Identify the recordable events and determine the ending accounts and element totals.
Separate the dates
The Monday order produces no journal entry under these assumptions. The agreement can create legal rights and duties without requiring recognition of the supplies and a payable before either party performs.
On Wednesday, delivery gives Alder a present right to the supplies' economic benefit and a present obligation to pay $3,000. The asset element and liability element each rise. The accounts retain the detail:
Supplies +$3,000
Accounts Payable +$3,000
On Friday, Alder gives up $1,000 cash and settles $1,000 of the existing obligation:
Cash −$1,000
Accounts Payable −$1,000
No new supplies arrive Friday, and the stated facts contain no consumption.
In a T-account, Wednesday's $3,000 Accounts Payable credit appears on the right and Friday's $1,000 debit appears on the left, leaving a $2,000 credit balance. The diagram visualizes the same account; it is not a second ledger, and debit does not mean decrease for every classification. Because the supplies remain unused, neither delivery nor settlement establishes current expense under the supplied facts. Expense follows supported consumption or another recognition requirement, not the cash-payment date. Calling the payment an expense would replace settlement of a liability with a different economic story.
Result
| Account or total | Ending amount |
|---|---|
| Cash | $1,000 |
| Supplies | $3,000 |
| Accounts Payable | $2,000 |
| Total assets | $4,000 |
| Total liabilities | $2,000 |
| Total equity | $2,000 |
The account detail reconciles to the element view:
$4,000 assets = $2,000 liabilities + $2,000 equity
Interpretation
Alder's cash fell on Friday, but equity did not. The payment used cash to reduce a creditor claim created on Wednesday. A statement reader needs the account detail to see that Alder now holds supplies rather than the original cash and still owes the vendor $2,000.
Common wrong paths
- Mistake: record the order as the purchase. Correction: under the stated assumptions, record Supplies and Accounts Payable when Alder obtains control on delivery, not when the parties sign the order.
- Wait until cash is paid to record anything: This loses Wednesday's asset and obligation and makes the records cash-timed rather than event-timed.
- Record Friday's payment as expense: This counts a new effect on equity instead of settling the payable already recognized.
- Call Accounts Payable the liability element: It is an account representing one kind of liability; the element is the broader class.
Verified calculation · accounting equation
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- events
- 2 items
Inspect data
[
{
"asset_changes": {
"supplies": 3000
},
"equity_changes": {},
"label": "supplies delivered on credit",
"liability_changes": {
"accounts_payable": 3000
}
},
{
"asset_changes": {
"cash": -1000
},
"equity_changes": {},
"label": "partial payment to vendor",
"liability_changes": {
"accounts_payable": -1000
}
}
]- opening
- 3 fields
Inspect data
{
"assets": {
"cash": 2000,
"supplies": 0
},
"equity": {
"owners_equity": 2000
},
"liabilities": {
"accounts_payable": 0
}
}Recomputed result
| Measure | Value |
|---|---|
| cash | 1,000 |
| equation difference | 0 |
| liability accounts payable | 2,000 |
| supplies | 3,000 |
| total assets | 4,000 |
| total equity | 2,000 |
| total liabilities | 2,000 |