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Hello sir, I was doing questions from the Practice Kit & I came across questions on Payables & Receivables control account’s. In both of these there were Cash refunds to credit customer’s (Receivables) & Refunds received feom suppliers (Payables)
After solving the chapter questions, when i checked against the answers, both of them had the refunds on the opposit side of the T account. For Receivables it was on Debit side and Payables it was on the credit. I do not understand why. Please explain me.
Thank You
I explain refunds in my free lectures!!
When we receive cash from a customer, the entry is to debit cash and credit receivables.
If we refund cash (a refund is a repayment of cash – maybe because the customer overpaid us) then we make the opposite entry: Cr Cash Dr Receivables.
I do suggest that you watch the free lectures – they are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Sir ? one question more..you said previously in the thread that closing balance comes on the DR SIDE? but when i watched your videos..i think it was mentioned..opening balance on the DR side..then credit sales , interest on overdue debt , dishonoured cheque..
and then comes cr side where there will be cash from credit customers , bank payments , bad debt , discount allowed , sales return , contra , closing balance.. am i right?? but there was a question where i am confused..
A receivables ledger control account had a closing balance of $8,500. It contained a contra to the purchase ledger of $400, but this had been entered on the wrong side of the control account.
The correct balance on the receivables ledger control account should be:
sir here i will write contra 2 times on cr side to cancel out 400 on dr side then comes 8500..it is the closing balance..it should be on the cr side isnt it? but the correct answer is 7700 debitThe balancing figure is on the credit side, but the balancing figure is always carried forward to the debit side – and that is the balance on the account.
(You may have watched the lectures on control accounts, but have you not watched the must earlier lecture on double entry where I explain all about the balancing of accounts?)The balance on receivables is always a debit balance – it must be because it is an asset!
As I wrote before, contra entries always reduce receivables.
They had entered it on the wrong side (the debit side) which will have increased receivables.
Therefore it needs removing twice and the correct answer is 8500 – 800 – 7700.Have you watched my free lectures on control accounts, because I explain why in the lectures!!!
A refund is simply a repayment of cash – for example, maybe the customer accidentally paid us too much, and so we repay them (refund them) the extra.
When we receive cash: Dr cash Cr Receivables.
If we refund some of the cash: Cr Cash, Dr Receivables.Please do watch the lectures – they are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
I love the free lectures of ACCA because im living in Tanzania one day i will become a chartered accountant
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