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June 8, 2015 at 7:24 pm
Sir! Chapter 16 Test papers QNo:4 reads as follows Opening balance of the payable ledger is $438900. There was a contra entry $980. The total of Purchase return journal was undercast by $1000 and an invoice of $4344 was posted as $4434. What is the amount to be reported as accounts payable.
The answer is said to be $437830 (D). but i disagree with it since there are purchase returns that has not been accounted for. I feel the answer is A ($4368300 That is Credit $438900 and debit $ 980 contra, Debit purchase return $1000 and debit the amount to correct the invoice $90 and the difference $436830. Kindly help.
John Moffat says
June 8, 2015 at 8:36 pm
The answer in the lecture notes is correct.
The payables ledger is where each individual balance is recorded. Each item from the purchase returns journal will be entered separately in the individual accounts in the payables ledger.
The total is entered in the nominal/general ledger and so that is wrong and the payables ledger control account balance will be wrong.
However the total does not affect the payables ledger itself at all.
March 24, 2015 at 7:16 am
Because it is always to cancel a receivable (so credit receivables) against a payable (so debit payables) because we are owed money and we owe money to the same person.
March 24, 2015 at 10:17 pm
Oh! I got that. Thank you so much!
March 23, 2015 at 8:23 pm
Can you please explain how is it that we always credit receivables and debit payables account in case of contra entries?
April 16, 2015 at 8:10 pm
He explained it in the first video @purnima. It’s more towards the end of the video if you want to fast forward.
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