A business returns goods purchased on credit to a supplier. Which account is credited?
Correct answer: A. Purchases Returns Account
- A. Purchases Returns Account
- B. Purchases Account
- C. Supplier’s Account
- D. Cash Account
Explanation
Goods returned to a supplier are recorded in Purchases Returns Account, which is credited to reduce the net purchases. The supplier’s personal account is debited because the amount payable becomes smaller.
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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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