A business buys goods on credit from Hamid. Which entry records this transaction?
Correct answer: D. Debit Purchases, credit Hamid
- A. Debit Hamid, credit Purchases
- B. Debit Hamid, credit Sales
- C. Debit Cash, credit Hamid
- D. Debit Purchases, credit Hamid
Explanation
Purchases of goods increase the purchases account, so it is debited. Hamid becomes a creditor, so his personal account is credited.
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About Ledger Accounts and the Trial Balance
Ledger accounts collect transactions under individual headings and use debit and credit sides to determine balances. The trial balance lists those balances to check arithmetical agreement before financial statements are prepared, but it does not reveal every error, such as complete omission, compensating errors or entries made in the wrong account.
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