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Smith Co has the following transactions:
1 Purchase of goods on credit from T Rader : $450
2 Return of goods purchased on credit last month to T Rouble: $700What are correct ledger entries to record these transactions?
The answer given of which I do not follow is given as follows
Dr purchases $450
Dr trade payables $250
Cr purchases returns $ 700I do not understand why trade payables are debited with $250. I am asking for clarification on that .
There are two separate transactions.
The entry for the purchase from T Rader is:
Debit purchases 450 and Credit payables 450The entry from the returns from T Rouble is:
Debit payables 700 and Credit returns 700Putting the two together means a net entry to payables of a debit of 700 – 450 = 250.
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