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Double entry bookkeeping

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Double entry bookkeeping

  • This topic has 1 reply, 2 voices, and was last updated 9 months ago by John Moffat.
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  • Author
    Posts
  • September 4, 2021 at 4:42 pm #634321
    advus
    • Topics: 13
    • Replies: 17
    • ☆

    Smith Co has the following transactions:
    (a) Purchase of goods on credit from T Rader:$450
    (b) Return of goods purchased on credit last month to T Rouble:$700
    What are the correct ledger entries to record these transactions?
    DEBIT Purchases $450
    DEBIT Trade Payables $250
    CREDIT Purchase Returns $700
    Dear Sir,could you tell me why the DEBIT Trade Payables is $250?How to calculate it?And why the $700 is recorded in the CREDIT Purchase Returns?Thank you.

    September 5, 2021 at 9:43 am #634398
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49603
    • ☆☆☆☆☆

    When they purchase goods, the entry is Dr Purchases Cr Payables with $450 (because they owe more)
    When they return goods, the entry is Dr Purchase returns Cr Payables with $700 (because they owe less)

    The net effect of crediting payables with 450 and debiting payables with 700 is a debit of 700 – 450 = 250.

    All of this is explained in my free lectures. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.

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