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Mike wrongly paid Norman $250 twice for goods purchased on credit. Norman subsequently reimbursed Mike for the overpayment of $250. How should Mike account for the reimbursement received from Norman?
Answer is -Debit Cash received, and Credit Trade payables control account
I cant understand why credit is trade payable?I explain this very problem in my free lectures and I do suggest that you watch them. They are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
When the goods were purchased, Mike debited purchases and credited payables with $250.
When Mike paid, he would credit cash and debit payables with $250. This will have happened twice because he paid twice.
Therefore there is now a debit balance on payables (Mike has overpaid and so is owed the money back).
When Mike received the refund of the overpayment, debit cash and credit payables. The balance on payables is now zero which is clearly correct.
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