A customer is also a supplier, and the amount receivable from that customer is set off against the amount payable to the same party. What entries are made in the control accounts?
Correct answer: B. Debit purchases ledger control and credit sales ledger control
- A. Debit sales ledger control and credit purchases ledger control
- B. Debit purchases ledger control and credit sales ledger control
- C. Debit both control accounts
- D. Credit both control accounts
Explanation
The set-off reduces both the receivable and the payable. Therefore, the sales ledger control account is credited and the purchases ledger control account is debited.
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About Bank Reconciliation and Control Accounts
Bank reconciliation explains differences between the cash book and bank statement through unpresented cheques, outstanding deposits, bank charges, direct payments, credited amounts and recording errors. Control accounts summarise receivables and payables ledgers, and their balances are reconciled with individual accounts to locate discrepancies.
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